The Monetary Authority of Singapore (MAS) has announced several initiatives aimed at improving tokenization within the financial sector, according to a November 4 report. statement.
According to the regulator, this move is intended to strengthen the liquidity of tokenized assets and support the growth of market infrastructure. To help drive the adoption of tokenized assets, MAS will establish commercial networks, develop industry frameworks and provide access to shared settlement facilities.
Leong Sing Chiong, Deputy Director of Markets and Development, noted a growing enthusiasm for tokenizing assets, especially in the areas of fixed income, currency and asset management.
He added that the initiative reflects strong support from financial institutions and policy makers who are working with MAS to create frameworks that focus on industry standards and risk management, allowing tokenized financial products to be launched at scale.
Deepening liquidity
An important part of this initiative is “Project monitor”, which brings together more than 40 financial institutions, industry associations and global policymakers from seven jurisdictions.
The goal of Project Guardian is to conduct comprehensive studies on the application of asset tokenization in capital markets. Major players including Citi, Standard Chartered, HSBC, Schroders and UOB have joined the Guardian Wholesale Network to foster a cooperative environment for expanding tokenization efforts.
To facilitate the adoption of tokenized assets, Project Guardian has introduced frameworks designed to guide industry practices. The Guardian Fixed Income Framework aims to provide clear guidance on implementing tokenization in debt capital markets, encouraging greater use of tokenized fixed income solutions.
In addition, the Guardian Funds Framework provides best practice recommendations for developing tokenized investment vehicles spanning different assets.
Other initiatives
MAS is also expanding its Global Layer One (GL1) initiative for 2023, welcoming new participants such as Euroclear and HSBC. This initiative will establish a working group of international financial market infrastructure providers focused on establishing control principles for digital asset securities.
In addition, MAS gives financial institutions access to common settlement assets, including the central bank’s Singapore dollar digital currency (CBDC). These common settlement assets are mutually recognized by the executing parties and are intended to increase the reliability of tokenized transactions and reduce settlement risks.
An initial test environment, the SGD Testnet, will soon be available to eligible financial institutions participating in Project Guardian and Project Orchid. This testnet will facilitate settlements using the S$ wholesale CBDC, with initial participants including DBS, OCBC, Standard Chartered and UOB.