Singapore Launches Networks for Digital Asset Tokenization

The Monetary Authority of Singapore (MAS) has unveiled a series of initiatives aimed at advancing tokenization in the financial sector. This announcement, made on November 4, 2024, outlines plans to enhance the liquidity of tokenized assets and foster the growth of market infrastructure.

Enhancing Tokenized Asset Adoption

To promote the use of tokenized assets, MAS will create commercial networks, develop industry frameworks, and provide access to shared settlement facilities. Leong Sing Chiong, deputy managing director of markets and development at MAS, highlighted the increasing interest in asset tokenization, especially in areas such as fixed income, foreign exchange, and asset management.

This initiative reflects the robust collaboration between financial institutions and policymakers, working alongside MAS to establish standards and risk management frameworks that facilitate the large-scale launch of tokenized financial products.

Project Guardian: A Key Initiative

One of the central components of this initiative is Project Guardian, which unites over 40 financial institutions, industry associations, and global policymakers across seven jurisdictions. The project's goal is to conduct extensive trials that explore the application of asset tokenization within capital markets.

Prominent institutions such as Citi, Standard Chartered, HSBC, Schroders, and UOB have joined the Guardian Wholesale Network, creating a collaborative atmosphere to enhance tokenization efforts. Project Guardian has introduced frameworks to guide industry practices, including:

• Guardian Fixed Income Framework: Provides guidelines for implementing tokenization in debt capital markets, encouraging the use of tokenized fixed-income solutions.

• Guardian Funds Framework: Offers best practices for developing tokenized investment vehicles that encompass a variety of assets.

Expanding Global Initiatives

In addition to Project Guardian, MAS is expanding its 2023 Global Layer One (GL1) initiative by welcoming new participants like Euroclear and HSBC. This initiative aims to form a working group of international financial market infrastructure providers to establish control principles for digital asset securities.

Moreover, MAS is enabling financial institutions to access common settlement assets, including the Singapore dollar wholesale central bank digital currency (CBDC). These common settlement assets are recognized by all transacting parties, enhancing the reliability of tokenized transactions and reducing settlement risks.

An initial testing environment, the SGD Testnet, will soon be available for eligible financial institutions involved 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.