MAS Tokenisation Push Reveals Growing Number of FX Use Cases

Foreign exchange is emerging as a key testing ground for tokenisation with use cases being tested across six major currencies, including on-chain pricing and execution of trades as well as corporate treasury applications and settlement functions, according to the Monetary Authority of Singapore.

The MAS has published plans to support, advance and commercialise tokenisation in financial services as it continues its efforts with 40 traditional institutions to experiment with DLT technology as part of Project Guardian. So far 15 industry trials have taken place across the dollar, the euro, Japanese yen, Swiss franc, and the Singapore and Australian dollars.

There are nine major traditional financial actors working on FX-related initiatives, including BNY, Citi, JP Morgan and T Rowe Price, on projects that include cross-border settlement, money market fund tokenization and FX swap digitisation. Citi and T Rowe Price are both working on on-chain pricing and execution projects.

“MAS has seen strong interest in asset tokenisation in recent years, notably in fixed income, FX, and asset management,” says Leong Sing Chiong, deputy managing director (Markets and Development) at MAS. “We are encouraged by the keen participation from financial institutions and fellow policymakers to co-create industry standards and risk management frameworks to facilitate commercial deployment of tokenised capital markets products, and scale tokenised markets on an industry wide basis.”

The Singapore central bank says it will facilitate access for financial institutions to common settlement assets including a Singapore dollar wholesale central bank digital currency (CBDC) for market testing purposes. This will offer three key initial features: a settlement facility for the issuance, transfer and redemption of SGD wholesale CBDC, with potential extensions to other forms of central bank and commercial bank liabilities.

Secondly, it will enable programmability, in other words the use of automated and conditional triggers for tokenised transactions, including the use of Purpose Bound Money and finally, interoperability, which will facilitate linkages with existing financial market infrastructures.

As part of MAS’ plans to form commercial networks to deepen the liquidity of tokenised assets, Citi, HSBC, Schroders, Standard Chartered and UOB established the Guardian Wholesale Network industry group, which will aim to establish “a multi-member network to commercialise their respective asset tokenisation trials and scale usage.”

Other goals set by the MAS include developing an ecosystem of market infrastructures, fostering industry frameworks for tokenised asset implementation as well as enabling access to common settlement facility.

The UK regulator, the Financial Conduct Authority (FCA) has “welcomed” the report from the MAS, noting that it has worked with project Guardian to develop use cases and that it, together with the UK Treasury, is an observer on the industry-led Technology Working Group. The FCA adds that the UK government’s Asset Management Taskforce is considering the implementation of fund tokenisation in the UK.