On 4 November 2024, the Monetary Authority of Singapore (“MAS“) announced plans to facilitate tokenisation in financial services through the following four measures.
- Forming commercial networks to deepen the liquidity of tokenised assets:
- Through Project Guardian (a collaboration between MAS and the financial industry to enhance the liquidity and efficiency of financial markets through asset tokenisation), MAS has convened over 40 stakeholders across seven jurisdictions to conduct industry trials on the use of asset tokenisation in capital markets, conducted in six currencies across multiple financial products.
- Following these trials, MAS is facilitating commercialisation in a coordinated manner. By connecting a broader set of participants’ products and services across multiple currencies and assets, greater improvements in capital raising, secondary trading, asset servicing and settlement of tokenised assets may be realised, which will deepen liquidity across primary and secondary markets for tokenised asset transactions.
- Through Project Guardian (a collaboration between MAS and the financial industry to enhance the liquidity and efficiency of financial markets through asset tokenisation), MAS has convened over 40 stakeholders across seven jurisdictions to conduct industry trials on the use of asset tokenisation in capital markets, conducted in six currencies across multiple financial products.
- The new Guardian Wholesale Networkindustry group – formed by Citi, HSBC and UOB, among others – will commercialise their respective asset tokenisation trials and scale usage.
- Developing the ecosystem of market infrastructures to facilitate cross-border transactions:
- MAS’ Global Layer One (“GL1“) initiative, launched in 2023, aims to foster the development of foundational digital infrastructures upon which commercial networks can be deployed. A core group of global banks have pioneered work to define the business, governance, risk, legal and technology requirements of the GL1 platform.
- GL1 is now expanding to develop an ecosystem of compatible market infrastructures enabling tokenised assets to be traded seamlessly across borders, and engaging in additional activities including: (i) aligning control principles, such as on governance, risk management controls and settlement arrangement conventions for cross-border transactions; (ii) development of specifications for market infrastructures and asset lifecycle; and (iii) achieving compliance by design, through the creation and provision of templates including programmable compliance checks, to build an ecosystem of compatible service providers.
- Recently, Euroclear and HSBC joined as new industry participants. Further, GL1’s new market infrastructure working group will focus on digital asset securities control principles.
- Fostering common industry frameworks for the implementation of tokenisation of assets: To facilitate broad-based acceptance and implementation of tokenised assets by financial institutions (“FIs“), MAS published:
- Guardian Funds Framework (“GFF“) covering: (i) recommendations for establishing a framework for the tokenisation of the fund lifecycle and activities, including asset servicing and on-chain share register archetypes and data; and (ii) the Guardian Composable Token Taxonomy (“GCTT“), which demonstrates how new tokenised assets which are a composite of multiple asset classes can be readily created.
- Guardian Fixed Income Framework (“GFIF“): (i) covering an industry guide to implementing tokenisation in Debt Capital Markets; and (ii) integrating the ICMA Capital Market Association’s Bond Data Taxonomy, Capital Markets and Technology Association’s Token Standards, and the Global Financial Markets Association’s Design Principles for Tokenised Securities.
- Guardian Funds Framework (“GFF“) covering: (i) recommendations for establishing a framework for the tokenisation of the fund lifecycle and activities, including asset servicing and on-chain share register archetypes and data; and (ii) the Guardian Composable Token Taxonomy (“GCTT“), which demonstrates how new tokenised assets which are a composite of multiple asset classes can be readily created.
- Enabling access to a common settlement facility for tokenised assets:
- Common settlement assets are instruments which are mutually agreed upon by transacting parties to execute financial transactions. Regulated and credible forms of tokenised money are needed as common settlement assets so as to reduce settlement risk and market fragmentation.
- MAS is promoting FIs’ access to common settlement assets for market testing purposes. The initial test network “SGD Testnet” will offer: (i) a settlement facility for the issuance, transfer and redemption of S$ wholesale central digital bank currency with potential extensions to other forms of central bank and commercial bank liabilities; (ii) programmability to automate and programme conditional triggers for tokenised transactions, including the use of Purpose Bound Money; and (iii) interoperability which facilitates linkages with existing financial market infrastructures.
- This will be made available to eligible FIs in Project Guardian and Project Orchid, with the first set of participating FIs to include DBS, OCBC, Standard Chartered and UOB. Participating use cases include payments and securities settlement.
- Common settlement assets are instruments which are mutually agreed upon by transacting parties to execute financial transactions. Regulated and credible forms of tokenised money are needed as common settlement assets so as to reduce settlement risk and market fragmentation.
Click on the following links for more information (available on the MAS website at www.mas.gov.sg):
- MAS Media Release titled “MAS Announces Plans to Support Commercialisation of Asset Tokenisation”
- MAS Media Release titled “Tokenisation in Financial Services: Pathways to Scale’ – Opening Keynote Address by Mr Leong Sing Chiong, Deputy Managing Director (Markets & Development), Monetary Authority of Singapore, at the Layer One Summit on 4 November 2024”
- MAS’ Report on the GFF
- MAS’ Report on the GFIF
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