The Monetary Authority of Singapore (MAS) announced on November 2 that it has officially launched a digital asset and decentralized finance (DeFi) trial, and said that the first industrial trial of its project “Project Guardian” has completed the first real-time transaction. Institutions include DBS Bank, JPMorgan Chase and SBI Digital Asset Holdings. The trial aims to explore potential DeFi applications for the wholesale funding market.
At present, the MAS has launched more industrial pilot programs to test the potential and use cases of asset tokenization and DeFi in the financial sector. This move is undoubtedly an important step for Singapore to step up its efforts to build a “digital financial center” and deepen the combination of blockchain and traditional finance.
The following is the full text of the announcement from the Monetary Authority of Singapore (MAS):
The Monetary Authority of Singapore (MAS) announced today that companies participating in Project Guardian’s first industrial trial, which aims to explore potential DeFi applications in wholesale funding markets, have completed the first live transaction. MAS has launched more industry trials to test asset tokenization and DeFi for wider use cases in the financial sector.
In the first industrial trial, DBS Bank, JPMorgan Chase, and SBI Digital Assets Holdings Inc. traded foreign exchange and government bonds against a liquidity pool consisting of tokenized Singapore government bonds, Japanese government bonds, Japanese yen (JPY) ) and New Coin (SGD).
Real-time cross-currency transactions involving tokenized JPY and SGD deposits were successfully conducted. In addition, a simulated operation involving the trading of tokenized government bonds was piloted.
DeFi enables entities to execute financial transactions directly with each other using smart contracts, without the need for financial intermediaries. Real-time transactions performed under the first experiment demonstrate that cross-currency transactions of tokenized assets can be traded, cleared, and settled instantly between direct participants. This saves the cost of executing trades through clearing and settlement intermediaries, as well as the management of bilateral counterparty trading relationships required in today’s over-the-counter (OTC) markets.
Oliver Wyman Forum (Oliver Wyman’s think tank), in partnership with DBS Bank, JPMorgan Chase and SBI Digital Asset Holdings, released a white paper summarizing the broad lessons from the first experiment, including how institutional DeFi protocols can be introduced into financial markets The benefits of digital asset interoperability and transaction efficiency.
Since the announcement of Project Guardian in May 2022, MAS has worked with the financial industry to identify key areas for collaboration, including:
Conduct industrial trials with financial institutions and fintech companies in Singapore and other jurisdictions to develop good asset tokenization use cases for financial services. Such trials allow the industry to identify opportunities to unlock economic value and uncover potential risk management issues.
Research the regulatory and risk management implications of tokenized asset trading, such as the regulatory treatment of tokenized liabilities and appropriate governance of institutional DeFi structures, to facilitate oversight and accountability.
Develop technical standards to support interoperability across digital asset ecosystems and potentially facilitate cross-currency transactions of tokenized assets globally. This involves first establishing a common identity and access framework backed by trust anchors, where regulated financial institutions screen, verify, and issue verifiable credentials to entities wishing to participate in DeFi protocols.
As more industries get involved, MAS is launching two new industry trials:
Trade Finance: Standard Chartered is leading the exploration of issuing tokens linked to trade finance assets. The project aims to digitize the trade distribution market by transforming trade assets into transferable instruments that are more transparent and accessible to investors.
Wealth Management: HSBC and UOB are working with Marketnode to enable native digital issuance of wealth management products, improving issuance efficiency and investor accessibility.
MAS welcomes additional proposals from the industry to address Project Guardian’s key focus areas – open interoperable networks, trust anchors, asset tokenization, and institutional-grade DeFi protocols. MAS invites interested parties to submit proposals to the Fintech Regulatory Sandbox for field experiments.
MAS Chief Fintech Officer Sopnendu Mohanty said:
Field trials led by industry players have shown that digital assets and DeFi have the potential to transform capital markets, provided they are properly protected. This is a huge step towards a more efficient global financial network. Project Guardian deepens MAS’s understanding of the digital asset ecosystem and contributes to the development of Singapore’s digital asset strategy. We look forward to working with more institutions to drive global learning of policies, standards and best practices for digital asset regulation and responsible innovation.