The Monetary Authority of Singapore (MAS), Singapore’s central bank, has joined forces with some of the country’s largest banks and financial services organizations to study the possibilities that asset tokenization and decentralized finance present.
Project Guardian is a collaboration between the MAS and other financial companies. The purpose of the research is to investigate the practicability of asset tokenization and the economic implications of potential risk management and financial stability strategies.
On the 31st of May, MAS informed readers of the partnership by publishing a notice regarding the relationship on its website. At the Asia Tech x Singapore Summit on Tuesday, Vice Prime Minister and Economic Co-ordinator Heng Swee Keat announced that activities for Project Guardian would soon commence in Singapore.
Inside the scope of the project, it is intended that DBS Bank Ltd., JP Morgan, and Marketnode will take the lead in conducting the first industry pilot to study the potential applications of DeFi within wholesale finance markets. As a direct result of the pilot project, tokenized bonds, and deposits, in addition to a permission liquidity pool, will be developed. On a public blockchain network, the execution of secured borrowing and lending will be handled through smart contracts.
The press release from the company states that the utilization of smart contracts on the blockchain makes it possible to represent digital assets or other items of value digitally. It is now feasible to use the internet to facilitate the fractionalization of high-value financial and real-economy assets and their exchange. It could boost financial services’ efficiency, accessibility, and affordability. Additionally, it has the potential to increase the liquidity of financial markets.
There are four primary areas where MAS plans to develop and test use cases:
- We are researching the use of public blockchains to construct open and interoperable networks that will enable the transfer of digital assets between different platforms and liquidity pools.
- The establishment of trust anchors in licensed financial institutions will screen, verify, and provide verifiable credentials to businesses that choose to participate in DeFi protocols.
- To build on top of the existing token standards, you will need to integrate trust anchor credentials and make asset-backed tokens compatible with other digital assets used in DeFi protocols that run on open networks.
- An examination of the capabilities of intelligent auditing contracts to locate potential vulnerabilities in the system’s security.