MAS Reveals Next Stage of Project Guardian
Posted by Colin Lambert. Last updated: November 18, 2023
The Monetary Authority of Singapore (MAS) has announced its plans to expand asset tokenisation initiatives, working with a range of financial industry firms to develop foundational capabilities to scale tokenised markets.
The new initiatives will commence under Project Guardian and “will catalyse 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 MAS.
In the new initiative Project Guardian’s industry group of 17 financial institutions has initiated five additional industry pilots to test what MAS says are “promising” asset tokenisation use cases. This potentially paves the way for integration across the capital markets value chain including listing, distribution, trading, settlement, and asset servicing.
Citi, T. Rowe Price Associates, 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; BNY Mellon and OCBC are trialling a cross-border FX payment solution to enable secure, interoperable payment solutions across heterogenous networks; and Ant International 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 centre in Singapore which supports over 40 currencies.
Elsewhere, Franklin Templeton is exploring the issuance of a tokenised money market fund through a Variable Capital Company (VCC) structure, which utilises digital asset networks to maintain the records of fund shares; and JP Morgan and Apollo are collaborating on the use of digital assets to enable more seamless investment and management of discretionary portfolios and alternative assets, automated portfolio rebalancing and customisation 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 saysi t is also 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 says it will collaborate with the Accounting and Corporate Regulatory Authority (ACRA) to better assess the opportunities and risks of adopting digitally native VCC fund shares.
MAS is also collaborating with international policymakers and FIs including BNY Mellon, DBS, JP Morgan and MUFG to explore the design of an open, digital infrastructure that will host tokenised financial assets and applications. This new initiative, called Global Layer One (GL1), will facilitate seamless cross-border transactions and enable tokenised 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 says.
In a further development, MAS says it 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 institutions 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 has been published by MAS.
Finally, MAS has welcomed the International Monetary Fund (IMF) staff to Project Guardian’s policymaker group which comprises policymakers from Japan, Singapore, Switzerland, and the UK. 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 tokenised financial assets such as fixed income, foreign exchange and asset management products can be traded, distributed, and settled seamlessly across borders,” says Leong Sing Chiong, deputy managing director (Markets and Development), MAS. “To fully realise the potential of tokenised markets, and achieve network effects, 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.”