MAS pushes on with tokenisation in financial services for commercialisation 

SINGAPORE - Singapore is pushing ahead in its plans for asset tokenisation in financial services so that commercialisation of the sector can take place.

What the Monetary Authority of Singapore (MAS) will do is connect a broader set of products and services from participants of its tokenisation projects to multiple currencies and assets.

This is expected to improve fund raising, secondary trading, asset servicing and settlement of tokenised assets.

Tokenisation is the process of digitally representing real and physical assets such as bonds and equities on the blockchain.

The plans come under

MAS’ Project Guardian that was launched in May 2022.

It explores the use of asset tokenisation in capital markets.

So far, the project has roped in more than 40 financial institutions, industry associations and international policymakers across seven jurisdictions.

Participants of the project have carried out more than 15 industry trials in six currencies across multiple financial products to improve real-time payments.

MAS’ deputy managing director Leong Sing Chiong said on Nov 4 that for tokenisation to achieve industry-wide adoption, there needs to be deeper liquidity in this area in the primary and secondary markets.

To support the formation of commercial networks, and to enable seamless transactions of tokenised assets across networks, there needs to be a digital infrastructure that meets the needs of regulated financial institutions, he added in his keynote address at the Insights Forum 2024.

Mr Leong noted that there also has to be common industry standards, as well as credible and regulated forms of tokenised money, for commercialisation to happen.

To support the industry, MAS will expand the activities undertaken via its Global Layer One (GL1) initiative. GL1 was launched in 2023 to design an open digital infrastructure of international standard.

For instance, GL1 will align governance, risk management controls and settlement arrangement conventions for cross-border transactions. It will also develop specifications for market infrastructures, and create templates that help with compliance.

Since the launch of GL1, a core group of global banks including BNY, Citi, JP Morgan, Mitsubishi UFJ Financial Group and Societe Generale-Forge has been leading efforts in this area. 

Two participants, Euroclear and HSBC, will join GL1, which will also set up a new market infrastructure working group that comprises global financial market infrastructure providers.

To pave the way for wider acceptance of tokenised assets by financial institutions, two frameworks on tokenisation of fixed income and funds were published on Nov 4.

To promote confidence in the settlement of tokenised assets in financial markets, MAS will facilitate financial institutions’ access to common settlement assets, including Singdollar wholesale central bank digital currency for market testing purposes.

This will be carried out via an initial test network called SGD Testnet.

The test network will be made available to participants of MAS’ real-time gross settlement system projects.

In his speech, Mr Leong also said Citi, HSBC, Schroders, Standard Chartered and UOB have formed the Guardian wholesale network industry group.

He said the new group is working on developing a network to scale their respective asset tokenisation trials.

Mr Leong added that the World Bank and Deutsche Bundesbank have joined the Project Guardian policymaker group.

“The role of this policymaker group is important as they help provide inputs on governance arrangements, guidance on how GL1 infrastructures can be developed in line with global standards, and (provide) advice on appropriate regulatory guardrails for tokenised asset transactions,” he said.

The Insights Forum, held at Marina Bay Sands Convention Centre, marks the start of a flurry of fintech events, including the ninth edition of the Singapore Fintech Festival, which will be held from Nov 6 to 8.