The Monetary Authority of Singapore (MAS) has unveiled four new plans to help advance tokenisation in financial services in the region.
Under Project Guardian, an international collaboration of industry and regulators that explores the use of fund and asset tokenisation, the Monetary Authority of Singapore has conducted over 15 industry trials in six currencies across multiple financial products.
Leong Sing Chiong, deputy managing director of markets and development at MAS, said: “MAS has seen strong interest in asset tokenisation in recent years, notably in fixed income, FX, and asset management. We are encouraged by the keen participation from financial institutions and fellow policymakers to co-create industry standards and risk management frameworks to facilitate commercial deployment of tokenised capital markets products, and scale tokenised markets on an industry-wide basis.”
Sing Chiong addressed an audience at the inaugural Layer One Summit, which preceded Singapore FinTech Festival 2024, and explained that, in order for tokenisation to scale and achieve industry-wide adoption, tokenised activity must span across assets, key currencies, and networks.
“There are four jigsaw puzzle pieces that need to come together to support industry-wide deployment of tokenised assets,” he explained. These are:
Liquidity
Foundational infrastructure
Standardised frameworks and protocols
Common settlement assets
Phase one – liquidity
The first phase of MAS’ plan to advance tokenisation in financial services is to deepen the liquidity of tokenised assets through the formation of commercial networks. By connecting a broader set of participants’ products and services across multiple currencies and assets, MAS hopes to foster improvements in capital raising, secondary trading, asset servicing and settlement of tokenised assets.
In alignment with this plan, Citi, HSBC, Schroders, Standard Chartered and UOB have formed the Guardian Wholesale Network industry group, aiming to establish a multi-member network to commercialise their respective asset tokenisation trials and scale usage.
Phase two – foundational infrastructure
MAS also plans to develop an ecosystem of market infrastructures to facilitate seamless cross-border transactions. In 2023, the central bank launched the Global Layer One (GL1) initiative, to help develop foundational digital infrastructures, on which it could deploy commercial networks. Since then, BNY, Citi, J.P. Morgan, MUFG and Societe Generale-FORGE have led efforts to define the business, governance, risk, legal and technology requirements of the platform.
To enable the trading of tokenised assets across borders, GL1 is expanding its scope to support the development of an ecosystem of compatible market infrastructures. To support this, new industry participants are joining the efforts, including Euroclear and HSBC.
GL1 also plans to set up a new market infrastructure working group, comprising global financial market infrastructure providers, that will focus on digital asset securities control principles.
Phase three – standardised frameworks and protocols
To facilitate the acceptance and implementation of tokenised assets by financial institutions, Project Guardian industry group members have published two industry frameworks:
Guardian Fixed Income Framework (GFIF) – provides an industry guide to implementing tokenisation in Debt Capital Markets, strengthening industry capabilities and catalyse adoption of tokenised fixed income solutions.
Guardian Funds Framework (GFF) – provides a set of recommendations for industry best practices for tokenised funds.
Phase four – common settlement assets
To promote confidence in the settlement of tokenised assets in financial markets, regulated and credible forms of tokenised money are needed as common settlement assets. Recognising this, MAS is facilitating financial institutions’ access to common settlement assets including S$ wholesale CBDC for market testing purposes.
The initial test network (SGD Testnet) will offer three key features:
Settlement facility – Issuance, transfer and redemption of S$ wholesale central bank digital currency (CBDC), with potential extensions to other forms of central bank and commercial bank liabilities.
Programmability – Automated and conditional triggers for tokenised transactions, including the use of Purpose Bound Money .
Interoperability – Facilitate linkages with existing financial market infrastructures.
SGD Testnet will be made available to eligible financial institutions in Project Guardian, enabling financial institutions to settle transactions with S$ wholesale CBDC. The first set of participating financial institutions includes DBS, OCBC, Standard Chartered and UOB.
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