Singapore’s MAS has a digital asset tokenization plan with ‘Guardian’

According to a statement by Deputy Prime Minister Heng Swee Keat, the Monetary Authority of Singapore (MAS) has unveiled Project Guardian. This will be a collaborative endeavour with the financial industry to examine the economic potential and use cases of asset tokenization.

Project Guardian will examine the feasibility of asset tokenization and decentralized finance (DeFi) applications while mitigating risks to financial stability and integrity. JPMorgan Chase has been selected by Singapore’s central bank to conduct a new blockchain trial examining the possibilities of DeFi.

Project details

The MAS will investigate DeFi applications in wholesale finance markets through the construction of a liquidity pool of tokenized bonds and deposits. This is to conduct borrowing and lending on a public blockchain-based network in the first stage of “Project Guardian.”

DBS and JPMorgan both have experience integrating digital assets and blockchain technology into their wholesale banking operations.

DBS issued a $15 million ($11.3 million) digital bond as part of a security token offering a year ago. Since its introduction in 2020, JPMorgan’s Onyx Digital Assets Network, which employs tokens for trading in fixed income markets, has executed over $300 billion in transactions.

Digital securities, which are blockchain-based assets backed by traditional financial instruments, will be the focus of the initiative. The results of the pilot will be utilized by Singapore’s central bank to shape the country’s crypto-policymaking.

Here, it is interesting to note that the action comes as the city-state works to establish itself as a hub for crypto-service providers. 

“The way to approach Web 3.0 is to keep an open mind. We must pierce through both the hubris and the veil of suspicion, to understand the potentially transformative underlying technology. Let us not throw the baby out with the bathwater.”

Crypto-giants leaving Singapore?

While MAS appears to be receptive to using public (permissionless) blockchains for Project Guardian, tokenized bonds and deposits will be deployed to a private (with permission) liquidity pool for the pilot. In the future, digital securities could be traded on local regulated online exchanges.

Project Guardian differs from a comparable – and currently operational – JPMorgan-led DeFi effort. In any event, it’s unclear whether Project Guardian’s promise of regulatory clarity would be enough to bring some of crypto’s biggest names back to Singapore.

With the regional arm of Binance shutting down last December, greater regulatory scrutiny and long wait periods have affected Singapore’s position as a crypto-hub of some stature.

Despite the global crackdown on the crypto-sector, Singapore is a crypto and blockchain technology-friendly state, allowing innovation to continue.

However, MAS has repeatedly warned the public against trading in cryptocurrencies and has taken steps to limit public cryptocurrency promotion. Following the latest Terra episode, Heng Swee Keat had warned retail investors to “steer clear” from cryptocurrencies.