We Love Decentralization

How decentralisation ushers in a new era for financial markets, full of promise

The Monetary Authority of Singapore (MAS) announced last month that the first industry pilot under MAS’ Project Guardian, a project that explores potential decentralised finance (DeFi) applications in wholesale funding markets, had just completed its first live trades.

Under the first pilot, DBS Bank, JP Morgan and SBI Digital Asset Holdings conducted forex and government bond transactions using liquidity pools that included tokenised Singapore Government Securities Bonds, Japanese Government Bonds, and the corresponding tokenised currencies.

Transactions under the pilot showed that tokenised cross-currency transactions can be traded, cleared, and settled instantly among direct participants. It reduces the costs of clearing, settlement, and of managing bilateral counterparty trading relationships, which is required in today over-the-counter markets.

A whitepaper released by the Oliver Wyman Forum in collaboration with the pilot’s participants summarises the main learnings and the potential benefits that digital asset interoperability can bring to financial markets.

In order to test asset tokenisation and DeFi in a wider range of financial industry use cases, some additional industry pilots were launched. MAS will pursue its collaboration with the financial sector through these pilots, the assessment of regulatory and risk management implications of tokenised asset transactions, and the development of industry-wide standards to ensure interoperability on a global scale.

One of the first steps on the journey toward global interoperability would be the establishment of a common identity framework, with some regulated institutions assuming the role of trust anchors. Entities that wish to use and participate in the DeFi protocols would need to prove their identities (or at least their right to participate) via the sharing of verifiable credentials (i.e digitally-signed, tamper-resistant attributes). This first pilot successfully used W3C verifiable credentials to ensure authorised access to the protocols.