Tokenized Asset Network Models Reviewed by Singapore Central Bank Following Trials

Tokenized Asset Network Models Reviewed by Singapore Central Bank Following Trials

As asset tokenization continues at a rapid pace, the Monetary Authority of Singapore (MAS) and 11 financial institutions examined infrastructure models to facilitate tokenized asset trading. The key to unlocking the full benefits of the technology is open and interoperable digital asset networks, the MAS said in its Project Guardian report released on June 26.

Project Guardian identified options for platform type, asset type, and network access with an eye to best practices. It used three test cases and drew observations on them while carefully noting that it does not endorse any of them.

Use Case 1: Over-the-Counter Foreign Exchange Transactions

A detailed examination highlighted a collaboration between DBS Bank and SBI Digital Asset Holdings in the first use case of over-the-counter (OTC) foreign exchange transactions. The examination concluded:

• Trading in a permissioned liquidity pool protocol achieves greater efficiency by reducing friction and minimizing risks
• Tokenized assets bring the benefits of atomic settlement

Use Case 2: Trade Finance

The second use case focused on Standard Chartered Bank’s asset-backed securities tokenization in trade finance. In this model, tokenized trade finance receivable assets are repackaged as natively issued fungible tokens and divided into two tranches with differing risk exposures. The report concluded that trading in the “senior,” less risky tokens would broaden the investor base for real economy assets.

Use Case 3: OTC-Structured Notes

The third use case examined OTC-structured notes, a popular wealth management product in Asian wealth centers. Currently, the issuance of such notes is labor-intensive and manual, requiring a high level of servicing. However, a network created by HSBC, Marketnode, and United Overseas Bank produces OTC-structured notes in a “token factory” by whitelisting parties on a public, permissionless platform, resulting in greater efficiency in creating and distributing the notes. These institutions are part of an industry-wide effort to establish common standards for asset issuance and exchange.

Project Guardian was launched in May 2022 and will continue to examine other focused themes of Trust Anchors and Institutional DeFi.