Singapore’s Regulator Begins First Digital Asset and DeFi Pilot Program

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Singapore’s Regulator Begins First Digital Asset and DeFi Pilot Program

The Monetary Authority of Singapore has announced that it has begun the first pilot test under its Project Guardian. The projects are set up to investigate the possible use cases of decentralized finance apps in wholesale financial markets. The pilot projects will serve the interest of every stakeholder in the Singaporean financial space and help for better regulatory decisions.

Opening Live Trades

The Monetary Authority said the first live trades have been successfully carried out. There are also other pilot projects that have been launched in the country. Their goal is to explore the live application of digital asset tokenization and decentralized finance across different use cases within the financial sector.

JP Morgan, SBI Digital Asset Holdings, and DBS Bank all carried out foreign exchange and bond transactions under the first financial industry pilot. They executed it against liquidity pools that were made up of tokenized Singaporean government bonds, the Singapore Dollar, the Japanese government bonds, and the Japanese Yen.

There was a live inter-currency transaction that involved tokenized Singapore Dollars and the Japanese Yen. The deposits were carried out successfully. Furthermore, a simulated exercise that involved buying and selling tokenized bonds was also carried out. 

Note that decentralized finance protocols enable entities to carry out financial transactions among themselves while using smart contracts. Financial intermediaries will not be involved in the process of such transactions.

The live transactions carried out during the first pilot phase revealed that inter-currency exchanges of tokenized assets are ready to be traded, settled, and cleared immediately among participants. This is going to save funds that would have been spent while carrying out the trade through settlement and clearing intermediaries. It also resolves issues of bilateral relations needed in modern-day markets.

The Oliver Wyman Forum collaborated with the pilot participants to publish a whitepaper on the lessons of the first pilot. The lessons include the advantages of the interoperability of digital assets and the efficiency that decentralized protocols can bring to the wider financial market.

MAS Welcome Pilot Solutions

Since Project Guardian was announced in May this year, MAS has continuously engaged financial institutions to find major collaborating areas. These areas include engaging FinTechs and financial institutions in pilot programs and studying the risk and regulatory implications around tokenized assets.

Another area of collaboration is in developing technical standards. This would aid interoperability in the digital space with the potential of facilitating inter-currency tokenized asset transactions. The first step is to establish an identity and framework that would be supported by anchors.

As a result of the industry engagements, the Monetary Authority has up with two other pilot projects. They are the Trade Finance and the Wealth Management.

The Trade Finance pilot is led by Standard Chartered Bank. The initiative is out to explore how tokens connected with trade finance assets can be issued. The project plans to make the trade distribution market digital by means of changing trade assets to transferable items.  

For Wealth Management, on the other hand, UOB and HSBC are collaborating with Marketnode. They want to enable the digital issuance of products for wealth management while they enhance the efficiency of issuance and investors’ accessibility.

MAS also said that it is open to other proposals that address major areas of Project Guardian from industry players. The proposals could include trust anchors, interoperable networks, DeFi protocols, and asset tokenization.

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Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile writer and researcher. He has keen interest in blockchain technology, cryptocurrencies, NFTs, Web3, metaverse, fintech and emerging technologies. He has tons of published works both online and in the print media. He has close to a decade of writing experience. When he is not writing, he spends time with his lovely wife and kids.