Singapore's Regulator To Explore Potential Of DeFi And Asset Tokenization

Singapore's financial regulator has collaborated with the finance industry to launch "Project Guardian," under which the city state looks to establish itself as a hub for decentralized finance (DeFi).

According to Bloomberg, Deputy Prime Minister Heng Swee Keat said Tuesday that Singapore will test the potential applications of asset tokenization and DeFi and simultaneously work on managing risks to financial stability and integrity.

Under the new project, the authorities aim to develop and pilot use cases based on open, interoperable networks; trust anchors; and institutional-grade DeFi protocols. The first pilot will evaluate the wholesale funding markets, which will be led by DBS Bank, JPMorgan and Marketnode Pte.

The pilot will feature the creation of a permissioned liquidity pool comprising tokenized bonds and deposits.

“Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding in this rapidly transforming digital assets ecosystem,” said Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore (MAS). “The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi, while mitigating its risks.”

Singapore has been one of the pioneers in crypto regulation after setting up a licensing regime a few years ago.[ However, due to the recent ban on crypto promotion and slow approvals, the nation has seen several crypto-based firms bidding their farewells.