The Monetary Authority of Singapore (PLUS) has announced that it has been successful in launching wholesale transactions with a focus on exploring both digital assets and decentralized finance (DeFi) ecosystem.

The concluded pilot program represents one of the leading banking regulators to test the DeFi and asset tokenization application in a broader range of use cases in the financial sector.

As revealed by MAS, major financial services players including DBS, JPMorgan Chase & Co and SBI Digital Asset Holdings transacted forex and government bonds against liquidity pools including tokenized Singapore government bonds, Japanese government, Japanese yen (JPY) and Singapore dollar (SGD).

A highlight of the pilot test as confirmed by Ty Lobban of JPMorgan is that MAS built the test environment around two of the most widely used blockchain protocols in the industry, including Polygon, a layer 2 protocol on the Ethereum network, as well as Aaveone of the pioneer DeFi lending protocols.

Building on the capabilities of DeFi protocols to cut out intermediaries by driving transactions directly between two entities using smart contracts, MAS said early pilots helped reduce transaction costs and delay experienced through clearing intermediaries and settlement, respectively.

Guardian of the Advanced Project

MAS launched the DeFi pilot under Project Guardian and has outlined pathways to continually participate in industry pilots, studying regulatory and risk management implications, as well as helping develop technical standards that can help foster a strong crypto ecosystem. .

“Live pilots led by industry participants demonstrate that with the right safeguards in place, digital assets and decentralized finance have the potential to transform capital markets,” said Sopnendu Mohanty, Head of FinTech at MAS.

“This is a big step in enabling more efficient and integrated global financial networks. Project Guardian has deepened MAS’s understanding of the digital asset ecosystem and contributed to the development of Singapore’s digital asset strategy. We look forward to working with more institutions to advance global learning on policies, standards, and best practices for digital asset regulation and responsible innovation.”

MAS presents itself as one of the most proactive central banks, whose interest in helping to develop solutions related to blockchain and cryptocurrencies is made evident by its specific activities. Considering the recent collapse of the Terra ecosystem and its impact on the market in general, the MAS is showing more commitment to tighten its control over the industry, but not so much as to damage innovations.

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