The Monetary Authority of Singapore (MAS) has announced several initiatives designed to enhance tokenization within the financial sector, according to a Nov. 4 statement.
According to the regulator, the move aims to strengthen tokenized assets’ liquidity and support market infrastructure growth. To help drive the adoption of tokenized assets, MAS will establish commercial networks, develop industry frameworks, and provide access to shared settlement facilities.
Leong Sing Chiong, deputy managing director of markets and development, noted growing enthusiasm for asset tokenization, particularly in fixed income, foreign exchange, and asset management.
He added that the initiative reflects strong support from financial institutions and policymakers working with MAS to create frameworks that address industry standards and risk management, helping launch tokenized financial products at scale.
Deepening liquidity
A key component of this initiative is “Project Guardian,” which brings together over 40 financial institutions, industry associations, and global policymakers from seven jurisdictions.
Project Guardian’s objective is to conduct comprehensive trials examining the application of asset tokenization in capital markets. Major players, including Citi, Standard Chartered, HSBC, Schroders, and UOB, have joined the Guardian Wholesale Network to foster a cooperative environment for expanding tokenization efforts.
To facilitate the adoption of tokenized assets, Project Guardian has introduced frameworks designed to guide industry practices. The Guardian Fixed Income Framework aims to provide clear guidelines for implementing tokenization in debt capital markets, encouraging greater use of tokenized fixed-income solutions.
Additionally, the Guardian Funds Framework offers best practice recommendations for developing tokenized investment vehicles encompassing various assets.
Other initiatives
MAS is also broadening its 2023 Global Layer One (GL1) initiative, welcoming new participants such as Euroclear and HSBC. This initiative will form a working group of international financial market infrastructure providers focused on establishing control principles for digital asset securities.
Furthermore, MAS enables financial institutions to access common settlement assets, including Singapore dollar wholesale central bank digital currency (CBDC). These common settlement assets are mutually recognized by transacting parties and aim to enhance the reliability of tokenized transactions and mitigate settlement risks.
An initial testing environment, the SGD Testnet, will soon be available to eligible financial institutions participating 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.