Originally published on: November 04, 2024
In a groundbreaking move, the Monetary Authority of Singapore (MAS) is spearheading the evolution of asset tokenization with the introduction of innovative frameworks to drive commercialization in the sector. The MAS has leveraged insights from various initiatives to create new guidelines aimed at propelling the tokenization of assets to new heights.
During the inaugural MAS Layer One Summit, MAS deputy managing director Leong Sing Chiong highlighted the achievements of major financial institutions involved in Project Guardian. These institutions have successfully showcased the potential of asset tokenization in areas such as foreign exchange and funds through over 15 trials conducted in seven jurisdictions using six different currencies.
However, Chiong cautioned that to realize the full potential of tokenized assets on a larger scale, various challenges need to be addressed. These include the need for enhanced liquidity, robust infrastructure, standardized frameworks, and common settlement assets. Addressing these challenges is a key focus area for the MAS.
One of the initiatives introduced to tackle these challenges is Project Guardian, launched in 2022. This project aims to enhance liquidity by facilitating capital raising, secondary trading, and asset servicing and settlement. Additionally, the MAS’s Global Layer One, developed in partnership with leading institutions like BNY, Citi, and JPMorgan, will play a pivotal role in expanding the infrastructure needed for asset tokenization.
The industry group behind Project Guardian has also unveiled two essential frameworks for implementing tokenization. The Guardian Fixed Income Framework provides a comprehensive guide for implementing tokenization in debt capital markets, integrating international standards and principles. On the other hand, the Guardian Funds Framework outlines best practices for fund tokenization, including the innovative Guardian Composable Token Taxonomy.
To further support tokenized money transactions, the SGD Testnet will soon be available to enable seamless access to tokenized funds for payments and securities settlements. This testnet will allow participants in initiatives like Project Orchid to leverage a Singapore dollar wholesale central bank digital currency (CBDC) for their transactions.
With the launch of projects like MBridge as a minimum viable product in October 2023, the commercialization of asset tokenization in Singapore is rapidly becoming a reality.
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