The Monetary Authority of Singapore (MAS) announced on Tuesday that it plans to research use cases for decentralized finance (DeFi) on public blockchains.
Known as Project Guardian and including partners such as JPMorgan, Marketnote and DBS, the project will look to collaborate with the financial industry to examine the “economic potential and value-adding use cases of asset tokenization.”
In a statement, MAS defined tokenization as "the process of digitally representing assets or items of value through a smart contract on a blockchain. This allows high value financial and real economy assets to be fractionalised and exchanged over the internet on a peer-to-peer basis.”
Project Guardian will stress test the feasibility of applications in asset tokenization and DeFi, developing pilot use cases in four main areas: open interoperable networks, trust anchors, asset tokenization and institutional grade DeFi protocols.
The first pilot taking place under the initiative, and led by financial industry partners, involves creating a permissioned liquidity pool. This will consist of tokenized bonds and deposits, with the purpose of carrying out secured borrowing and lending on a public blockchain, executed by smart contracts.
"Developed on public blockchain, this pilot is also pivotal as it furthers efforts to innovate, advance and scale institutional financial applications on blockchain and their interoperability across different blockchain networks with the long-established rails of the existing financial markets. We believe that these early explorations in DeFi solutions will ensure the competitiveness and relevance of Singapore as a cutting edge financial centre,” Han Kwee Juan, group head of planning and strategy at DBS, said in the statement.