Singapore collaborates with finance industry to explore digital currency use cases

The Monetary Authority of Singapore (MAS), Singapore’s de facto central bank financial regulatory authority, is looking to explore the “economic potential and value-adding use cases” of digital assets. 

In its latest announcement, the MAS has launched a collaborative initiative with the finance industry called Project Guardian. Project Guardian will test the feasibility of managing financial stability and integrity risks in using public blockchains for asset tokenization and decentralized finance (DeFi). 

The project will develop and pilot use cases focused on four main areas: open, interoperable networks, trust anchors, asset tokenization, and institutional-grade DeFi protocols. DBS Bank Ltd., JPMorgan Chase & Co., and Marketnode Pte. will lead the first industry pilot.

These institutions are tasked with exploring potential DeFi applications in wholesale funding markets. They are to create a permission liquidity pool comprising tokenized bonds and deposits to facilitate lending and borrowing on a public blockchain using smart contracts. 

All three partners have accepted the challenge of working with the MAS. In a statement, Marketnode CEO Martin Pickrodt said the firm is ready to address market issues through the “innovative and meaningful initiative out of Singapore.”

“Through Project Guardian, we aim to address real market issues, such as fragmented liquidity venues, high intermediation costs, and transaction inefficiencies, and are looking forward to the journey ahead,” he said.

The MAS’s chief FinTech officer, Sopnendu Mohanty, added that the initiative would sharpen the regulator’s understanding of the digital assets ecosystem. 

“Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding in this rapidly transforming digital assets ecosystem,” Mohanty said. 

Notably, Singapore employed a similar approach to industry partners in the ongoing exploration of its CBDC. Last year, it named 15 firms involved in the project to help it build a retail CBDC.

Is Singapore losing favor with digital assets firms?

The initiative is noted to be coming at a critical time for Singapore. The Southeast Asian country has long been known as a financial hub and has been gunning to become a digital assets hub as well.

However, its policies have not kept up with the requirements of digital assets firms. Bloomberg reports that Singapore’s slow pace in granting licenses to digital assets firms and other bottlenecks has been motivating the firms to move base, most commonly to Dubai.

Despite the seeming exodus, Singapore has continued to profess an open mind to digital currencies. The MAS stated that it believes stablecoins have a place in the country even though it is developing its digital currency. 

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