Singapore Pilots DeFi Applications For Trade Finance and Wealth Management

The Monetary Authority of Singapore (MAS) carried out the first real life use case in cross-currency transactions using decentralised finance protocols.

J.P. Morgan, DBS Bank and SBI Digital Asset Holdings used the Aave protocol on Polygon—a layer-2 scaling solution—to complete foreign exchange and government bond transactions on the Ethereum network. The banks exchanged tokenized versions of Singapore government securities bonds for Japanese government bonds, and Japanese Yen for Singapore Dollars as a test. Oliver Wyman think tank has since released the report on institutional DeFi which features asset tokenisation and DeFi protocols usage for incumbent financial institutions.

MAS’ Project Guardian which explores potential DeFi applications in wholesale funding markets has been underway since May, 2022.

Under the project, MAS announced the following plans for two new industry pilots:

“Trade Finance: Standard Chartered Bank is leading an initiative to explore the issuance of tokens linked to trade finance assets. The project aims to digitise the trade distribution market, by transforming trade assets into transferable instruments that are more transparent and accessible to investors.

Wealth Management: HSBC and UOB are working with Marketnode to enable native digital issuance of wealth management products, enhancing issuance efficiency and accessibility for investors.”

Singapore has been one of the leading global jurisdictions to create a hub with appropriate, cutting edge regulatory framework for digital assets and companies operating in the field. Earlier this week, Singapore authorities issued operating licenses for Paxos and Circle to execute payments and cross-border transactions.