The Monetary Authority of Singapore (MAS) announced plans to advance tokenisation in financial services. These include:

• forming commercial networks to deepen liquidity of tokenised assets;
• developing an ecosystem of market infrastructures;
• fostering industry frameworks for tokenised asset implementation; and
• enabling access to common settlement facility for tokenised assets.

Deepening liquidity of tokenised assets through formation of commercial networks

2 MAS has, under Project Guardian, convened over 40 financial institutions, industry associations and international policymakers^[1] across seven jurisdictions to carry out industry trials on the use of asset tokenisation in capital markets. To-date, more than 15 industry trials have been conducted in six currencies across multiple financial products^[2].

3 As Project Guardian participants commercialise their products and services following successful industry trials, MAS is facilitating commercialisation to take place in a coordinated, networked manner.  By connecting a broader set of participants’ products and services across multiple currencies and assets, greater improvements in capital raising, secondary trading, asset servicing and settlement of tokenised assets may be realised. This will deepen liquidity across primary and secondary markets for tokenised asset transactions. To this end, Citi, HSBC, Schroders, Standard Chartered and UOB have formed the Guardian Wholesale Network industry group, with the intent of establishing a multi-member network to commercialise their respective asset tokenisation trials and scale usage.

Developing ecosystem of market infrastructures to facilitate seamless cross border transactions

4 MAS launched the Global Layer One (GL1) initiative in 2023 to foster the development of foundational digital infrastructures^[3], upon which commercial networks could be deployed.  Since the launch, a core group of global banks, BNY, Citi, J.P. Morgan, MUFG and Societe Generale-FORGE have been leading efforts to define the business, governance, risk, legal and technology requirements of the GL1 Platform.

5 To build on this, GL1 is expanding its scope to support the development of an ecosystem of compatible market infrastructures, enabling tokenised assets to be traded seamlessly across borders. Specifically, GL1 will undertake the following additional activities:

• Control Principles – Alignment on governance, risk management controls^[4] and settlement arrangement conventions for cross border transactions. This provides clarity on roles, responsibilities and controls needed to safeguard market integrity and financial stability.
• Specifications – Development of specifications for market infrastructures and asset lifecycle^[5]. This encourages interoperability between diverse systems.
• Compliance by Design – Creation and provision of templates including programmable compliance^[6] checks to build an ecosystem of compatible service providers. This accelerates onboarding for new participants.

6 To support these developments, MAS is pleased to announce the addition of new industry participants, including Euroclear and HSBC. GL1 will also set-up a new market infrastructure working group, comprising global financial market infrastructure providers, that will focus on digital asset securities control principles.

Industry Frameworks for Implementation of Tokenisation

7 To facilitate broad based acceptance and implementation of tokenised assets by financial institutions, two industry frameworks developed by Project Guardian industry group^[7] members were published today.

• Guardian Fixed Income Framework (GFIF)  – GFIF integrates the International Capital Market Association’s Bond Data Taxonomy, Capital Markets and Technology Association’s Token Standards, and the Global Financial Markets Association’s Design Principles for Tokenised Securities. This provides an industry guide to implementing tokenisation in Debt Capital Markets, strengthen industry capabilities and catalyse adoption of tokenised fixed income solutions.
• Guardian Funds Framework (GFF)  – GFF provides a set of recommendations for industry best practices for tokenised funds. This includes the Guardian Composable Token Taxonomy to facilitate development of tokenised investment vehicles comprising multiple assets, simplifying the process of incorporating new tokenised funds, and help achieve efficiencies in fund settlement.

Access to Common Settlement Facility for Tokenised Assets

8 Common settlement assets are instruments which are mutually agreed upon by transacting parties to execute financial transactions. To promote confidence in the settlement of tokenised assets in financial markets, regulated and credible forms of tokenised money are needed as common settlement assets, thereby reducing settlement risk and market fragmentation. MAS is therefore facilitating financial institutions’ access to common settlement assets including S$ wholesale CBDC for market testing purposes. The initial test network (SGD Testnet) will offer three key features:

• Settlement facility – Issuance, transfer and redemption of S$ wholesale central bank digital currency (CBDC), with potential extensions to other forms of central bank and commercial bank liabilities.
• Programmability – Automated and conditional triggers for tokenised transactions, including the use of Purpose Bound Money .
• Interoperability – Facilitate linkages with existing financial market infrastructures.

9 The SGD Testnet would be made available to eligible financial institutions^[8] in Project Guardian and Project Orchid, enabling financial institutions to settle transactions with S$ wholesale CBDC. The first set of participating financial institutions includes DBS, OCBC, Standard Chartered and UOB. Participating use cases include payments and securities settlement.

10 Mr Leong Sing Chiong, Deputy Managing Director (Markets and Development) of MAS, “MAS has seen strong interest in asset tokenisation in recent years, notably in fixed income, FX, and asset management. 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.”

Source: MAS

SBI Digital Markets builds framework for cross-border distribution of tokenised securities; drives commercial adoption for Project Guardian initiatives

• Fixed Income Pilot: creating liquidity by connecting regulated digital asset exchanges for tokenised asset-backed securities
• Asset and Wealth Management Pilot: streamlining subscriptions and redemptions with digital transfer agent smart contracts for a UBS tokenised money market fund

SBI Digital Markets (SBIDM) has renewed its participation in the Monetary Authority of Singapore’s Project Guardian pilots, taking part in the Fixed Income and Asset and Wealth Management pilots with a focus on driving commercial adoption. Through its collaboration with financial institutions, SBIDM is actively building an end-to-end framework for the primary and secondary market distribution of tokenised securities by connecting regulated digital asset exchanges across multiple jurisdictions. SBIDM is also partnering with blockchain technology leaders to achieve operational efficiencies and unlock cost savings for financial institutions.

Winston Quek, Chief Executive Officer of SBI Digital Markets, said: “This year, SBI Digital Markets has focused its efforts on building regulated frameworks to facilitate the end-to-end flow of tokenised securities. From origination, tokenisation, distribution, digital custody, listing on digital asset exchanges and building secondary trading – we have put in place workflows for efficient cross-border distribution networks whilst allowing for dual issuances in traditional and tokenised formats. We have adopted open and interoperable architecture in both operational structuring and tech engineering to allow institutional investors at various stages of digital transformation to join our journey and unlock efficiencies through blockchain technology.”

Fixed Income Pilot: Tokenised Asset-Backed Securities

As part of the Fixed Income pilot, SBIDM set out to expand the distribution network of tokenised securities and create global secondary market liquidity for investors. SBIDM has set up a regulated structure for the securities to be issued in both traditional and tokenised formats to cater to all investors. To facilitate cross-border secondary market liquidity, SBIDM has connected regulated digital asset exchanges across multiple jurisdictions with a blockchain-agnostic technology and governance framework.

SBIDM will be launching this industry-first regulated end-to-end framework with the global secondary market in the next two months, with the first product being a structured note backed by luxury wines followed by intellectual property and commodities.

Asset and Wealth Management Pilot: UBS Tokenised Money Market Fund

Under the Asset and Wealth Management pilot, SBIDM built on the momentum of its 2023 Project Guardian technical pilot with UBS Asset Management. This year’s pilot sees the potential commercial application of a UBS tokenised fund with a Variable Capital Company (VCC) structure, achieving further operational efficiencies with smart contract-based automation of fund subscription and redemption workflows. Interactions between distributors, fund issuers and fund administrators were streamlined through an interoperable architecture that enhanced efficiency, transparency and reduces operational costs.

To facilitate cross-chain communication with the tokenised fund contract, SBI Digital Markets created a digital transfer agent smart contract, leveraging Chainlink’s industry-standard Cross-Chain Interoperability Protocol (CCIP). The pilot demonstrated the feasibility of using smart contracts and the Chainlink Platform to streamline fund operations across different blockchain networks and financial systems, unlocking a fundamental shift in operational efficiency and transparency for the US$63 trillion^[1] mutual fund industry.

Driving Commercial Adoption

Beyond the commercial adoption of the tokenised money market fund and asset-backed securities, SBIDM is also working with partners on the commercialisation of a tokenised bond. This will see the commercial transaction arising from last year’s world’s first live repurchase transaction (repo) with a natively-issued digital bond on a public blockchain. SBIDM will announce more details on the transaction in the coming months.

Source: SBI