The Monetary Authority of Singapore (MAS) has announced the expansion of initiatives to scale asset tokenisation for financial services. This includes partnering with global industry associations and financial institutions to drive common asset tokenisation standards in fixed income, foreign exchange (FX), and asset and wealth management.
MAS, with international financial institutions, also announced on June 27 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.
Industry associations join Project Guardian
Over the past two years, MAS has worked with 24 financial institutions to pilot “promising” asset tokenisation use cases under Project Guardian.
These financial institutions include asset managers, market operators, custodians, credit rating agencies and commercial banks.
To promote greater traction in these use cases, Global Financial Markets Association (GFMA), International Capital Market Association (ICMA) and the International Swaps and Derivatives Association (ISDA) will join Project Guardian’s industry group.
See also: MAS expands asset tokenisation initiatives via financial industry partnership
In addition, three workstreams will be set up to foster the development of standards and frameworks across key asset classes.
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.
The FX workstream, in partnership with ISDA and the Global Foreign Exchange Division (GFXD) of the GFMA, will develop FX data specifications, risk management frameworks and FX documentation.
See also: MAS launches digital asset ecosystem report; expands Project Guardian with 11 partners
Finally, the asset and 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.
GL1 initiative
To effectively scale tokenised asset transactions globally, MAS says 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 financial institutions including BNY, Citi, J.P. Morgan, MUFG Bank and Societe Generale-FORGE (SG Forge) on the business, governance, risk, legal and technology considerations of a shared ledger infrastructure.
International policymakers observing the GL1 initiative include staff from the European Central Bank, Banque de France and the International Monetary Fund.
To this end, MAS has published a 21-page whitepaper detailing the design principles, objectives, considerations and potential uses of GL1. The full report is available on MAS’s website.
GL1 plans to collaborate with more policymakers, central banks, regulators, international standards-setting bodies and financial institutions as its work progresses, says MAS.
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In the next phase, GL1 will explore the establishment of a non-profit organisation (GL1 Org) to develop common principles, policies and standards for operating a global shared ledger infrastructure.
MAS says this will complement the potential future establishment of independent operating companies that would build and deploy the GL1 infrastructure.
Leong Sing Chiong, deputy managing director (markets and development) at MAS, says Project Guardian provides a useful platform for central banks, regulators and financial institutions to “understand the opportunities and risks of asset tokenisation” while operating within a safe environment.
Leong adds: “The GL1 initiative is an important next step to realise the potential of asset tokenisation and reap efficiencies in capital markets. Such public-private partnerships are fundamental to ensure financial infrastructures continue to serve the needs of market participants and consumers, while maintaining market integrity and financial stability.”
