Singapore weighs up the future of tokenization and DeFi

abdelaziz Fathi

As the world gets to grips with tokenization and DeFi, Singapore regulators are exploring the economic potential and value-adding use cases of these new technologies.

The Monetary Authority of Singapore (MAS) has launched a collaborative initiative dubbed ‘Project Guardian,’ in partnership with DBS, JPMorgan (JPM) and Marketnode. The collbration aims to research use cases of open and interoperable networks within the blockchain ecosystem.

Not many details were revealed about the matter, but MAS is actively working on regulations that might one day permit so-called tokenization, which allows a crypto token to represent a traditional asset like stocks. On top of that, Singapore’s central bank will look into issues related to trading digital assets, as well as DeFi applications in wholesale funding markets through existing financial infrastructure.

“ When applied in the context of financial services, such smart contracts enable Decentralised Finance (DeFi), where financial transactions such as borrowing, lending, and trading activities can be performed autonomously on a blockchain without the need for intermediaries. It could potentially enhance the efficiency, accessibility, and affordability of financial services, increase liquidity in financial markets, and enhance economic inclusion,” the statement reads.

The first industry pilot under Project Guardian involves the creation of a permissioned liquidity pool comprising tokenised bonds and deposits. The pilot aims to carry out secured borrowing and lending on a public blockchain-based network through execution of smart contracts.

MAS bases its optimism not only on the explosion of public interest in blockchain-enabled cryptocurrencies and crypto tokens but also on growing recognition that blockchain technology could have applications far beyond cryptocurrency transactions.

For STO operators, the framework will entail proper regulation that covers key risks including AML and counter-terrorist financing, investor protection, governance and safe custody.

The tokenization of equities has already been highly appealing to VC firms and investment bankers in Asia and elsewhere, particularly in a friendly jurisdiction for issuing equity tokens such as Singapore.

“J.P. Morgan continues to develop blockchain-based solutions for financial services   and sees deposits accessible on the public blockchain as the next step in the evolution of digitized commercial bank money from prior work done on JPM Coin System (intra-bank offering), Partior (inter-bank offering). J.P Morgan has co-innovated with MAS leading to several industry first products and introduction of tokenised deposits on public blockchain is yet another milestone we look forward to launching” said Umar Farooq, CEO of Onyx at J.P. Morgan.

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