MAS to explore the economic potential of DeFi

Image Courtesy: Reuters

The Monetary Authority of Singapore (MAS) has announced ‘Project Guardian’, a collaborative initiative with the financial industry that seeks to explore the economic potential and value-adding use cases of asset tokenisation.

Project Guardian, which was launched by Heng Swee Keat, deputy prime minister and coordinating minister for economic policies, at the Asia Tech X Singapore Summit, will test the feasibility of applications in asset tokenisation and DeFi (decentralised finance) while managing risks to financial stability and integrity.

“MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies to consumers, investors, and the financial system at large,” said Sopnendu Mohanty, chief fintech officer, MAS.

He added that through practical experimentation with the financial services industry and the broader ecosystem, MAS seeks to sharpen its understanding of this rapidly transforming digital assets ecosystem and that the learnings from Project Guardian will serve to inform policymakers on the regulatory guardrails needed to harness the benefits of DeFi while mitigating its risks.

MAS aims to develop and pilot use cases in open, interoperable networks, trust anchors (entities that maintain ledgers in the blockchain ecosystem), asset tokenisation, and institutional-grade DeFi protocols.

The first industry pilot under Project Guardian will explore potential DeFi applications in wholesale funding markets and will be led by DBS Bank, JPMorgan and Marketnode, a joint venture between the Singapore Stock Exchange and Temasek.

It will involve the creation of a permission liquidity pool comprising tokenised bonds and deposits. The pilot aims to carry out secured borrowing and lending on a public blockchain-based network through the execution of smart contracts.