MAS announces plans to support commercialisation of asset tokenisation

28 November 2024

On 4 November 2024, the Monetary Authority of Singapore (“MAS”) issued a press release announcing its plans to advance tokenisation in financial services. Notably, the press release reports on the publication of two industry frameworks developed by Project Guardian industry group members, the Guardian Fixed Income Framework (“GFIF”) and the Guardian Funds Framework (“GFF”).

Details are set out below.

Deepening liquidity of tokenised assets through formation of commercial networks

As Project Guardian participants commercialise their products and services following successful industry trials, MAS is facilitating commercialisation to take place in a coordinated and networked manner. By connecting a broader set of participants’ products and services across multiple currencies and assets, greater improvements in capital raising, secondary trading, asset servicing, and settlement of tokenised assets may be realised. This will deepen liquidity across primary and secondary markets for tokenised asset transactions. To this end, several banks have formed the Guardian Wholesale Network industry group, with the intent of establishing a multi-member network to commercialise their respective asset tokenisation trials and scale usage.

Developing ecosystem of market infrastructures to facilitate seamless cross border transactions

MAS launched the Global Layer One (“GL1”) initiative in 2023 to foster the development of foundational digital infrastructures, upon which commercial networks could be deployed. Since the launch, a core group of global banks have been leading efforts to define the business, governance, risk, legal, and technology requirements of the GL1 platform.

To build on this, GL1 is expanding its scope to support the development of an ecosystem of compatible market infrastructures, enabling tokenised assets to be traded seamlessly across borders. Specifically, GL1 will undertake the following additional activities:

  • Control principles: Alignment on governance, risk management controls and settlement arrangement conventions for cross border transactions. This provides clarity on roles, responsibilities and controls needed to safeguard market integrity and financial stability.
  • Specifications: Development of specifications for market infrastructures and asset lifecycle. This encourages interoperability between diverse systems.
  • Compliance by design: Creation and provision of templates including programmable compliance checks to build an ecosystem of compatible service providers. This accelerates onboarding for new participants.

To support these developments, MAS announced the addition of new industry participants. GL1 will also set up a new market infrastructure working group, comprising global financial market infrastructure providers, that will focus on digital asset securities control principles.

Industry frameworks for implementation of tokenisation

To facilitate broad based acceptance and implementation of tokenised assets by financial institutions, two industry frameworks developed by Project Guardian industry group members were published:

  • Guardian Fixed Income Framework: GFIF integrates the International Capital Market Association’s Bond Data Taxonomy, the Capital Markets and Technology Association’s Token Standards, and the Global Financial Markets Association’s Design Principles for Tokenised Securities. This provides an industry guide to implementing tokenisation in debt capital markets, strengthening industry capabilities, and catalysing the adoption of tokenised fixed income solutions.
  • Guardian Funds Framework: GFF provides a set of recommendations for industry best practices for tokenised funds. This includes the Guardian Composable Token Taxonomy (i) to facilitate development of tokenised investment vehicles comprising multiple assets, simplifying the process of incorporating new tokenised funds and (ii) to help achieve efficiencies in fund settlement.

Access to common settlement facility for tokenised assets

Common settlement assets are instruments which are mutually agreed upon by transacting parties to execute financial transactions. To promote confidence in the settlement of tokenised assets in financial markets, regulated and credible forms of tokenised money are needed as common settlement assets, thereby reducing settlement risk and market fragmentation. MAS is therefore facilitating financial institutions’ access to common settlement assets including S$ wholesale central bank digital currency (“CBDC”) for market testing purposes. The initial test network (“SGD Testnet”) will offer three key features:

  • Settlement facility: Issuance, transfer, and redemption of S$ wholesale CBDC, with potential extensions to other forms of central bank and commercial bank liabilities.
  • Programmability: Automated and conditional triggers for tokenised transactions, including the use of Purpose Bound Money.
  • Interoperability: Facilitate linkages with existing financial market infrastructures.

The SGD Testnet would be made available to eligible financial institutions in Project Guardian and Project Orchid, enabling financial institutions to settle transactions with S$ wholesale CBDC. Participating use cases include payments and securities settlement. MAS has announced the first set of participating financial institutions.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg: