Singapore to Explore DeFi And Tokenization Within Existing Financial Structures

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  • MAS recently launched Project Guardian, a digital assets trial utilizing tokenization to execute borrowing and lending on a blockchain-based network. 
  • Major financial industry partners involved in the pilot include J.P. Morgan, DBS Bank, and Marketnode.
  • The project aims to mitigate risks of DeFi against the country's financial stability, explore the wholesale use of DeFi, and stop the drainage of crypto talents and blockchain businesses to other destinations.

The Monetary Authority of Singapore explores DeFi, establishing a liquidity pool of tokenized bonds and deposits.

On Tuesday, the Monetary Authority of Singapore announced the launch of a financial industry collaborative pilot project. The digital assets trial, named Project Guardian, was created to test the potential economic asset of tokenization and decentralized finance

"MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies -- to consumers, investors and the financial system at large," said Chief FinTech Officer at MAS, Sopnendu Mohanty.

Announced at the Asia Tech x Singapore Summit this week, the project is being led by Deputy Prime Minister and Coordinating Minister for Economic Policies, Heng Swee Keat. MAS is currently one of the few major regulators to explore the future financial world of DeFi protocols. If it succeeds, Singapore could easily position itself as an established global financial center. 

Major financial players 

Some well-known financial institutions partnering with the pilot project include J.P. Morgan, DBS Bank, and crypto venture, Marketnode. Institutions DBS and J.P. Morgan are no strangers to the world of cryptocurrency. In 2020, DBS established its own institutional-grade exchange and debuted a crypto trust solution in May 2021. It also launched an $11 million digital bond in a security token offering last year. J.P. Morgan's experience in blockchain technology and digital assets almost speaks for itself. Since its start in 2020, the institution's digital assets network has completed over $300 billion in transactions.

The focus of Project Guardian 

The project pilot includes four areas of focus: open and interoperability of networks, trusted anchors, asset tokenization, and institutional-grade DeFi protocols. By allowing smart contract-based borrowing and lending on a public blockchain through liquidity pools of tokenized bonds and deposits, MAS hopes to accomplish its main goal of exploring the risks and rewards when utilizing DeFi in a wholesale market.

Group Head of Planning and Strategy at DBS, Han Kwee Juan, also spoke to the focus of PG, saying, "Developed on public blockchain, this pilot is also pivotal as it furthers efforts to innovate, advance and scale institutional financial applications on blockchain and their interoperability across different blockchain networks with the long-established rails of the existing financial markets."

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The bottom line

As Singapore explores how DeFi might affect its financial stability and progression, it has positioned itself for a global financial bolstering. In the midst of tokenization and DeFi exploration, MAS hopes to sharpen its understanding of the digital assets ecosystem and work through opportunities and risks that come with the advancement of the digital technology financial world. 

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