Singapore launches "Guardian" program, utilizing public blockchain and DeFi concepts to complete foreign exchange and bond transactions

The Monetary Authority of Singapore's (MAS) Project Guardian has completed its first pilot transactions on 11/2. DBS Bank, JPMorgan, and SBI Digital Asset Holdings conducted forex and government bond trades using a liquidity pool that includes tokenized Singaporean government bonds, Japanese government bonds, Japanese yen, and Singapore dollars.

Project Guardian

In May this year, MAS announced Project Guardian, a collaboration with financial institutions to explore applications of decentralized finance (DeFi) and asset tokenization, including:

• Conducting industry pilots with financial institutions and fintech companies in Singapore and other jurisdictions to develop good use cases for asset tokenization in financial services.
• Studying the regulatory and risk management implications of tokenized asset trading, such as regulatory treatment of tokenized liabilities and appropriate governance of institutional DeFi structures, for better supervision and accountability.
• Developing technical standards to support interoperability within the cross-digital asset ecosystem and potentially facilitate cross-currency trading of tokenized assets globally.

First Pilot

The pilot project involved collaboration between DBS Bank, JPMorgan, and SBI Digital Asset Holdings, utilizing various blockchain technologies.

• Utilizing the Polygon public chain to save on gas fees.
• Setting parameters such as exchange rates and interest rates through Aave's permissioned pool concept.
• Issuing verifiable credentials (VC) on-chain through VC to manage user addresses and establish standardized credentials portable to other dApps to reduce transaction risks.
• Building institutional wallets that ensure traders cannot access company funds and only approved devices can engage in transactions.

The pilot involved tokenizing Singaporean government bonds, Japanese government bonds, Singapore dollars, and Japanese yen in the liquidity pool. Institutions verified to obtain VCs could use their wallets to trade in forex and government bonds in the liquidity pool, saving costs and time associated with settlement in traditional financial markets.

Sopnendu Mohanty, Chief Fintech Officer of MAS, stated:

The results of this pilot demonstrate that with appropriate guardrails, digital assets and DeFi have the potential to transform capital markets. This signifies a significant step towards achieving a more efficient and interconnected global financial network. Project Guardian deepens MAS's understanding of the digital asset ecosystem and contributes to the development of Singapore's digital asset strategy. We look forward to collaborating with more institutions to advance global policies, standards, and best practices for digital asset regulation and responsible innovation.

MAS has more pilot projects in the pipeline, including tokenization of issuance and trade finance assets led by Standard Chartered Bank, and the native digital issuance of wealth management products in collaboration with HSBC, OCBC Bank, Marketnode, a joint venture between the Singapore Exchange and Temasek.