MAS expands industry collaboration to scale asset tokenisation for financial services, publishes whitepaper on Global Layer One initiative
30 July 2024
On 27 June 2024, the Monetary Authority of Singapore (“MAS”) announced the expansion of initiatives to scale asset tokenisation for financial services. This includes partnering with global industry associations and financial institutions (“FIs”) to drive common asset tokenisation standards in fixed income, foreign exchange (“FX”), and asset and wealth management. MAS, together with international FIs, also announced the successful completion of the first phase of the Global Layer One (“GL1”) initiative and plans to develop standards, market practices, and governing principles of foundational digital infrastructure for tokenised assets.
Developing industry standards and risk management frameworks
Over the past two years, MAS has worked with FIs, including asset managers, market operators, custodians, credit rating agencies, and commercial banks, to pilot promising asset tokenisation use cases under Project Guardian. To promote greater traction in these use cases, MAS has welcomed the Global Financial Markets Association (“GFMA”), International Capital Market Association (“ICMA”), and the International Swaps and Derivatives Association (“ISDA”) to be the first global industry associations to join Project Guardian’s industry group.
Building on the successes of industry pilots, the following three workstreams will be set up to foster the development of standards and frameworks across key asset classes:
- Fixed Income workstream: The Fixed Income workstream will work with ICMA to develop protocols and data specifications building on ICMA’s Bond Data Taxonomy and consider the types of risk factors and disclosures required in a tokenised bond offering document. Workstream members will also partner GFMA to develop standard clauses for implementing smart contracts of fixed income products.
- FX workstream: The FX workstream, in partnership with ISDA and the Global Foreign Exchange Division of the GFMA, will develop FX data specifications, risk management frameworks, and FX documentation.
- Asset & Wealth Management workstream: The Asset & Wealth Management workstream will deepen collaboration with global custodians and asset managers, focus on common data models, and model risk considerations specific to fund tokenisation.
Fostering development of shared ledger infrastructure
To effectively scale tokenised asset transactions globally, MAS explains that there is a need for a shared ledger infrastructure that can host multiple types of tokenised financial assets while meeting relevant regulatory requirements and preserving the policy autonomy of participating jurisdictions. Under the GL1 initiative, MAS is collaborating with international policymakers and FIs on the business, governance, risk, legal, and technology considerations of a shared ledger infrastructure.
Next phase for GL1
MAS has published a whitepaper which details the design principles, objectives, considerations, and potential uses of GL1. GL1 will expand collaboration with more policymakers, central banks, regulators, international standards setting bodies, and FIs as work on GL1 progresses. In the next phase, GL1 will also explore the establishment of a non-profit organisation to develop common principles, policies, and standards for operating a global shared ledger infrastructure. MAS explains that this would complement the potential future establishment of independent operating companies that would build and deploy the GL1 infrastructure.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg: