The Monetary Authority of Singapore (MAS) has on Wednesday announced that it is working with the financial industry to expand asset tokenization initiatives and develop foundational capabilities to scale tokenized markets.

MAS said in a statement that these developments under Project Guardian will catalyze the institutional adoption of digital assets, with the aim of freeing up liquidity, unlocking investment opportunities, and increasing the efficiency of financial markets.

According to the statement, Project Guardian’s industry group of 17 financial institutions (FIs) has initiated five additional industry pilots to test promising asset tokenization use cases.

This potentially paves the way for integration across the capital markets value chain including listing, distribution, trading, settlement, and asset servicing.

It is noted that Citi, T. Rowe Price Associates, Inc. and Fidelity International are testing institutional-grade mechanisms to price and execute bilateral digital asset trades efficiently, and explore real-time post-trade reporting and analytics of digital asset trades.

Meanwhile, BNY Mellon and OCBC are trialling a cross-border foreign exchange (FX) payment solution to enable secure, interoperable payment solutions across heterogenous networks.

Ant Group, on the other hand, is trialling a treasury management solution to enhance liquidity management funding globally.

This solution will enable real-time multi-currency clearing and settlement through their global treasury center in Singapore which supports over 40 currencies.

It is also noted that Franklin Templeton is exploring the issuance of a tokenized money market fund through a Variable Capital Company (VCC) structure, which utilizes digital asset networks to maintain the records of fund shares.

J.P. Morgan and Apollo are also collaborating on the use of digital assets to enable more seamless investment and management of discretionary portfolios and alternative
assets, automated portfolio rebalancing and customization at scale.

This will provide time savings and reduction in manual processes for asset servicing.

In response to strong interest from the funds industry, MAS is launching a new funds workstream within the Project Guardian industry group focused on the native issuance of
Variable Capital Company (VCC) funds on digital asset networks.

This workstream aims to address tax, policy and legal considerations while increasing distribution channels for asset managers.

MAS will collaborate with the Accounting and Corporate Regulatory Authority (ACRA) to better assess the opportunities and risks of adopting digitally native VCC fund shares.

According to the statement, MAS is collaborating with international policymakers and financial institutions (FIs) including BNY Mellon, DBS, JP Morgan and MUFG to explore the design of an open, digital infrastructure that will host tokenized financial assets and applications.

This new initiative, called Global Layer One (GL1), will facilitate seamless cross-border transactions and enable tokenized assets to be traded across global liquidity pools, while meeting relevant regulatory requirements and guidelines.

The participation of public-private stakeholders will help ensure that foundational digital infrastructures are established in accordance with international standards.

MAS is also collaborating with the financial industry to develop an Interlinked Network Model (INM) which will serve as a common framework for exchanging digital assets
across independent networks.

This enables FIs to transact with each other without the need for all of them to be on the same network.

A whitepaper, “Interlinking Networks”, which details how INM may be applied in practice and the design considerations for its implementation was published on Wednesday.

The whitepaper was jointly developed in collaboration with FIs, FinTechs and industry groups.

MAS is also pleased to welcome the International Monetary Fund (IMF) staff to Project Guardian’s policymaker group which comprises policymakers from Japan, Singapore, Switzerland, and the United Kingdom.

IMF will provide an international perspective on the policies and legal issues that would facilitate cooperation around cross-border platforms and preserve the stability of the international monetary system.

“Project Guardian’s industry pilots have successfully demonstrated that tokenized financial assets such as fixed income, foreign exchange and asset management products can
be traded, distributed, and settled seamlessly across borders,” said Leong Sing Chiong, Deputy Managing Director (Markets and Development), MAS.

To fully realize the potential of tokenized markets, and achieve network effects, he said a scalable digital infrastructure is needed.

“GL1 will provide a foundational digital backbone and bring markets together with similar principles of openness and accessibility as the public internet,

“MAS welcomes additional policymakers and financial institutions to participate in the design phase of the GL1 initiative and contribute towards its development,” he added.

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