By establishing a liquidity pool of tokenized bonds and deposits, MAS will investigate DeFi applications in wholesale funding markets.
Project Guardian, a blockchain-based digital assets trial that will use tokenization, has been launched by the Monetary Authority of Singapore (MAS). The project will use regulated financial institutions as “trust anchors,” with JP Morgan, DBS Bank, and Marketnode, the SGX joint venture for bonds, participating in a pilot.
Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat spearheaded the Project Guardian initiative, which was announced at the Asia Tech x Singapore Summit on Tuesday. By establishing a liquidity pool of tokenized bonds and deposits to execute borrowing and lending on a public blockchain-based network, MAS will investigate decentralised finance (DeFi) applications in wholesale funding markets.
Lessons from Project Guardian, according to MAS chief fintech officer Dr. Sopnendu Mohanty, will serve as a foundation for informing policy markets on the regulatory guardrails that are required to use DeFi while also mitigating its risks.
In their wholesale banking operations, both DBS and JPMorgan have experience developing digital assets and blockchain technology. DBS issued a $11 million digital bond as part of a security token offering last year (STO). JPMorgan’s Onyx Digital Assets Network has completed over $300 billion in transactions since its launch in 2020. DBS Bank has been involved in the cryptocurrency industry for several years, and in December 2020, it launched its own institutional-grade crypto exchange. The exchange’s supported digital asset services have been steadily expanding, with a crypto trust solution set to launch in May 2021.
The Malaysian Securities Authority (MAS) has taken the lead in researching the future of finance using DeFi protocols, becoming one of the few major regulators to do so. If it succeeds, Singapore’s position as a global financial centre may be strengthened.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.