As Singapore looks to establish itself as a hub for decentralised finance (DeFi) after several key crypto players left, it has begun a project to investigate potential uses of asset tokenisation.
According to a statement from Deputy Prime Minister Heng Swee Keat on Tuesday (May 31), a collaboration between the Monetary Authority of Singapore (MAS) and the finance industry, “Project Guardian” will look into the feasibility of applications in asset tokenization and DeFi while working to manage risks to financial stability and integrity.
The project aims to develop and pilot use cases for open, interoperable networks and institutional-grade DeFi protocols. The first pilot in the project will explore potential applications of DeFi in wholesale funding markets. Led by DBS Bank Ltd, JPMorgan Chase & Co and Marketnode Pte Ltd, the pilot involves the creation of a permissioned liquidity pool consisting of tokenized bonds and deposits.
The MAS was relatively early among regulators to examine blockchain technology, and Singapore set up a licensing regime just a few years ago. However, a crypto advertising ban caught the industry off guard with applicants have been frustrated by the slowness of approvals.
Bybit Fintech Ltd moved its headquarters to Dubai from Singapore, where the government is actively wooing companies in the space. Three Arrows also switched to Dubai and crypto exchange Binance Holdings Ltd shifted many of its operations from Singapore.
“Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding of this rapidly transforming digital assets ecosystem,” said Sopnendu Mohanty, the chief fintech officer of the MAS. “The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi while mitigating its risks.”