Singapore’s Monetary Authority (MAS) has announced the start of its first pilot program that investigates potential Decentralized Finance (DeFi) applications in large-scale resource markets.
A press release from the MAS stated that the first pilot transaction launch will enable tokenized asset transactions to be marketed, moved, and settled instantly among direct participants. This will invariably eliminate the costs of performing trades through clearing and settlement brokers, as well as managing multilateral issuer trading relationships, which are required in today’s retail markets.
MAS also revealed that DBS Bank, SBI Digital Asset Holdings, and JPMorgan were among the companies that conducted foreign exchange and government bond transactions against liquidity pools comprising tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY), and Singapore Dollars (SGD) in the first industry pilot program.
Since the announcement of the pilot program in May 2022, MAS has teamed up with the financial industry to identify key areas for partnership.
These areas include the creation of technical standards to support interactions across digital asset platforms, todecentralized facilitate global cross-currency tokenized asset transactions; conducting industry pilots with financial institutions and Fintechs in Singapore and other administrations and researching tokenized asset transactions for their bureaucratic and risk management implications.
MAS’s Chief FinTech Officer, Mr. Sopnendu Mohanty said in a statement that
“the live pilots led by industry participants show that, with the right safeguards in place, digital assets and decentralized finance have the potential to transform capital markets. This is a significant step forward in the development of more efficient and integrated global financial networks.”
Ty Lobban of JP Morgan also highlighted in a tweet that Polygon was used for trade because they wanted to build the program on Ethereum and needed to spend less on gas to conduct some expensive verification operations. He also noted that a modified version of Aave Arc was used to control parameters such as interest rates and currency exchange rates.
1st, we used @0xPolygon for the trade because we wanted to do this on #Ethereum and needed cheap gas fees for some expensive operations around Identity verification. Future phases of Guardian will explore other blockchains too given the MAS goal for open/interoperable networks.
— Ty Lobban (@TyLobban) November 2, 2022
The Implication of Using DeFi
DeFi allows entities to conduct financial transactions directly with one another using smart contracts thus eliminating the need for financial intermediaries.
Michael Patryn, also known as ‘Sifu,’ Co-founder of the defunct Canadian crypto exchange QuadrigaCX, has launched UwU Lend, a Decentralized Finance (DeFi) platform which is also built on the Aave blockchain.
https://t.co/Rkin96Ccdbhttps://t.co/A9UQ22X2gH pic.twitter.com/hnvOPeLO16
— 0xsifu (@0xSifu) September 21, 2022
The move from the MAS is evident that regulators are also keen on learning about the DeFi ecosystem, a trend that will help fuel innovative and growth-oriented regulation.
