Deputy Prime Minister and coordinating minister for economic policies Heng Swee Keat has warned retail investors to “steer clear” of cryptocurrencies.
“We cannot emphasise this enough,” says Heng at the Asia Tech x Singapore Summit, which will take place from May 31 to June 2.
Heng’s warning comes after many investors suffered losses from the recent price crashes of TerraUSD and Luna.
The crashes have also affected the prices of other cryptocurrencies, including Bitcoin.
In spite of that, the government is still keen to leverage on the benefits of the digital asset ecosystem.
“We remain keen to work with blockchain and digital asset players to encourage innovation, and build up trust in the sector,” says Heng, referring to the number of licenses and in-principle approvals granted to 11 digital payment token services in the past two years.
See also: Bitcoin retreats from US$100,000 in worst spell since Trump’s win
MAS to partner industry to explore tokenisation of financial assets
Further to his speech, Heng announced the launch of Project Guardian, which is a collaborative effort by the Monetary Authority of Singapore (MAS) to partner the industry to explore the tokenisation of financial assets and develop the future of financial infrastructure.
According to a separate statement released by the MAS, Project Guardian will test the feasibility of applications in asset tokenisation and DeFi.
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The project will also seek to manage risks to financial stability and integrity.
The central bank will be focusing on four main areas, where it aims to develop and pilot use cases.
These are:
- exploring the use of public blockchains to build open, interoperable networks that enable digital assets to be traded across platforms and liquidity pools,
- establishing a trusted environment for the execution of DeFi protocols. This will be done through a common trust layer of independent trust anchors. Trust anchors are regulated financial institutions that screen, verify and issue verifiable credentials to entities that wish to participate in DeFi protocols,
- looking at the representation of securities in the form of digital bearer assets and the use of tokenised deposits issued by deposit-taking institutions on public blockchains, and
- studying the introduction of regulatory safeguards and controls into DeFi protocols to mitigate against market manipulation and operational risk. The project will also examine the use of smart contract auditing capabilities to detect code vulnerabilities.
The first industry pilot under Project Guardian will explore potential DeFi applications in wholesale funding markets.
Led by DBS Bank, JP Morgan and Marketnode, a joint venture between SGX Group and Temasek, the pilot involves the creation of a permissioned liquidity pool comprising tokenised bonds and deposits. It also aims to carry out secured borrowing and lending on a public blockchain-based network through execution of smart contracts.
Further to its statement, MAS says it welcomes further industry initiatives that address the project’s four areas of interest.
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Sopnendu Mohanty, chief fintech officer at MAS, says, “MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies - to consumers, investors and the financial system at large.”
“Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding in this rapidly transforming digital assets ecosystem. The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi, while mitigating its risks,” he adds.
Han Kwee Juan, head, group planning and strategy at DBS, says, “DBS is pleased to lead the charge to explore potential digital assets and use of DeFi concepts that will enhance efficiency and scalability in trading, clearing and settlement; while managing risks to financial stability and integrity. 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.”
“J.P. Morgan continues to develop blockchain-based solutions for financial services and sees deposits accessible on the public blockchain as the next step in the evolution of digitized commercial bank money from prior work done on JPM Coin System (intra-bank offering), Partior (inter-bank offering). J.P Morgan has co-innovated with MAS leading to several industry first products and introduction of tokenised deposits on public blockchain is yet another milestone we look forward to launching," adds Umar Farooq, CEO of Onyx, J.P. Morgan.
Martin Pickrodt, CEO of Marketnode, says, "Marketnode is pleased to collaborate with MAS and industry partners, DBS and J.P. Morgan, on this innovative and meaningful initiative out of Singapore. Having spearheaded various digital capital market initiatives over the last three years, we are excited to jointly develop a common market infrastructure which leverages the many benefits that institutional-grade DeFi protocols and tokenisation technologies can bring. Through Project Guardian, we aim to address real market issues, such as fragmented liquidity venues, high intermediation costs and transaction inefficiencies, and are looking forward to the journey ahead."
