The Monetary Authority of Singapore (MAS) successfully completed a cross-currency transaction involving tokenized Japanese yen and Singapore dollar deposits as part of a pilot exploring the potential of DeFi applications in wholesale funding markets.
DBS Bank, JPMorgan and SBI Digital Asset Holdings participated in the foreign exchange and government bond transactions against liquidity pools comprised of tokenized yen, Singapore dollars and Singapore Government Securities Bonds, MAS said in a statement.
According to a tweet from JPMorgan's Ty Lobban, the multinational investment bank first used Polygon in order to settle on Ethereum for low fees — which were necessary to reduce operating costs associated with identity verification. It then leveraged Aave's permissioned pools concept and deployed a modified version of Aave Arc in order to set specific parameters.
CeFi goes DeFi
Financial institutions are catching on to the benefits of decentralized finance — specifically, the removal of third-party intermediaries and their associated costs.
"The live transactions executed under the first pilot demonstrate that cross currency transactions of tokenised assets can be traded, cleared and settled instantaneously among direct participants," MAS noted in the release on the pilot, known as Project Guardian. "This frees up costs involved in executing trades through clearing and settlement intermediaries, and the management of bilateral counterparty trading relationships as required in today’s over-the-counter (OTC) markets."
The latest announcement from MAS follows Monday's news that DBS is partnering with Open Government Products, a tech team within the Singapore government, to launch a live pilot for the issuance of purpose-bound money-based vouchers, which are issued using tokenized Singapore dollars on a blockchain.
MAS is now launching two new industry pilots — one for trade finance and another for wealth management. The former is a Standard Chartered Bank-led initiative to explore tokenized trade finance assets. The latter involves HSBC and UOC working with Marketnode to enable native digital issuance of wealth management products.
“The live pilots led by industry participants demonstrate that with the appropriate guardrails in place, digital assets and decentralised finance have the potential to transform capital markets," MAS chief fintech officer Sopnendu Mohanty said.
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