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Monetary Authority of Singapore proposes new design framework for digital currencies

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The Monetary Authority of Singapore (MAS) has published a report pushing for creating a novel framework to improve the interoperability of distributed ledgers for digital currencies.

The report “Enabling Open & Interoperable Networks” is a collaboration between MAS, the Bank for International Settlements (BIS), and a select group of financial and technical partners. In its statement, MAS noted that the report explored the use of tokenization to achieve interoperability while ensuring uniformity with international best practices.

The latest report is part of the central bank’s broader study under the umbrella of Project Guardian, burrowing into the use cases of decentralized finance (DeFi) in wholesale funding markets. Delving deeper into asset tokenization, MAS announced the launch of the Project Guardian Industry Group, comprised of 11 financial institutions experimenting in several areas.

In asset and wealth management, the trio of HSBC, UOB, and Marketnode are already experimenting with digital native structured products, while Schroders and Calastone are probing the prospects of a tokenized investment vehicle.

MAS’ new industry group is also wading into fixed income and foreign exchange, with Standard Chartered leading the charge with a platform to handle initial token offerings. Citi is exploring the execution of digital asset trades on DLT while SBI Digital Asset Holdings, DBS Bank, and UBS AG are collaborating on repurchasing agreements hinged digital bonds.

The multiple pilots under Project Guardian have attracted Japan’s Financial Services Agency (FSA) as it looks to play an observer role in the studies.

“We are delighted to join the Project Guardian as an observer,” said Mamoru Yanase, Deputy Director-General of the Strategy Development and Management Bureau at the FSA. “We look forward to working with MAS, traditional financial institutions and FinTech firms to further enhance our knowledge in this area.”

An avalanche of studies for MAS

Not content with pilots under Project Guardian, MAS published a paper specifying the conditions for other digital assets like stablecoins, tokenized bank deposits, and central bank digital currencies (CBDCs).

The paper was a joint effort involving the International Monetary Fund (IMF) and the Bank of Korea, seeking to unify standards across different classes of digital assets. The paper disclosed the technical details of Purpose Bound Money (PBM), an asset class designed for greater customization.

“This collaboration among industry players and policymakers has helped achieve important advances in settlement efficiency, merchant acquisition, and user experience with the use of digital money,” remarked Sopnendu Mohanty, MAS Chief Fintech Officer.

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