Key Components of Project Guardian
Tokenisation refers to the process of representing assets digitally using a smart contract on the blockchain. This process enables the exchange of high-value real-world assets through peer-to-peer digital platforms. The application of tokenisation via smart contracts forms the foundation of Decentralised Finance (DeFi) as a service. The execution of these transactions on the blockchain is autonomous, requiring no intermediaries. The goal is to enhance the efficiency, affordability, and accessibility of financial markets, thereby boosting liquidity and promoting economic inclusion.
Project Guardian aims to investigate the potential of tokenising assets and utilizing DeFi applications, while also addressing the associated risks to financial stability and integrity. The project focuses on four key areas: open and interoperable networks, trust anchors, asset tokenisation, and institutional-grade DeFi protocols.
The MAS will explore the use of public blockchains to establish open, interoperable networks, facilitating the trading of digital assets across different platforms and liquidity pools. This interoperability will also integrate with existing financial infrastructure. By promoting open networks, Project Guardian aims to reduce the creation of walled gardens that limit access to digital exchanges and private markets. Trust anchors, operating within regulated financial institutions, will provide a reliable environment for executing DeFi protocols by validating and distributing credentials to participants.
Asset tokenisation allows securities to be represented as digital assets and tokenised deposits to be used on public blockchains by institutions. Project Guardian will work on enhancing current token standards, incorporating trust anchor credentials, and ensuring the interoperability of asset-backed tokens with digital assets in DeFi protocols. The project will also explore how regulatory frameworks can be applied to institutional-grade DeFi protocols to mitigate operational risks and market impact. Furthermore, the project will investigate the audit capabilities of smart contracts to identify potential code vulnerabilities.
One of the first initiatives of Project Guardian is to investigate the application of DeFi in wholesale funding markets. MAS plans to explore how a permissioned liquidity pool of tokenised deposits and bonds can help secure borrowing and lending within a public blockchain-based network, using smart contracts for execution.
MAS is also open to other industry initiatives that align with the four primary areas of interest in Project Guardian. The authority has invited proposals from the industry to be submitted to the Regulatory Sandbox for live experimentation. According to MAS’s Chief FinTech Officer, Mr. Sopnendu Mohanty, MAS is eager to support innovations in the digital asset ecosystem. The authority will assess the potential opportunities and risks posed by new technologies, examining their impact on consumers, investors, and the broader financial system. The insights from Project Guardian will be used to inform regulatory policies, creating a framework that will maximize the benefits of DeFi while minimizing its risks.
MAS Collaborations in Project Guardian
Project Guardian is spearheaded by Marketnode, JPMorgan, and DBS. Both DBS and JPMorgan have extensive experience in integrating digital assets and blockchain technology into wholesale banking. DBS, for instance, issued USD 11.3 million in digital bonds via a security token offering (STO). JPMorgan, on the other hand, operates the Onyx Digital Assets Network, where token trading in the fixed-income market has reached over USD 300 billion since its launch in 2020. According to Han Kwee Juan, Group Head of Strategy and Planning at DBS, these initial efforts in DeFi are essential to ensuring Singapore’s competitiveness and maintaining its status as a global financial hub.
Uman Farooq, CEO of Onyx by J.P. Morgan, emphasizes that JPMorgan’s collaboration with MAS will lead to pioneering products and tokenised deposits on a public blockchain, marking a significant milestone for Singapore. Martin Pickrodt, CEO of Marketnode, highlights that the collaboration with MAS, DBS, and JPMorgan aims to address existing market challenges by leveraging the benefits of asset tokenisation and DeFi protocols.
