Singapore central bank strikes partnership with foreign financial regulators for tokenization pilots

The Monetary Authority of Singapore (MAS) has unveiled a multilateral collaboration with financial regulators in several jurisdictions as it advances its regime of digital asset pilots.

In a statement, the MAS confirmed partnerships with the U.K.’s Financial Conduct Authority (FCA), Switzerland’s Financial Market Supervisory Authority (FINMA) and Japan’s Financial Services Agency (FSA). Singapore’s central bank disclosed that the arrangements will see an increase in the pace of tokenization pilots in “fixed income, foreign exchange, and asset management products.”

Singapore has been experimenting with asset tokenization via its Project Guardian studies, racking up impressive milestones. Since Project Guardian’s launch, the MAS has relied on 15 financial institutions for its studies, but advances in “scale and sophistication” have forced the hand of the Singaporean central bank to establish a policymaker group.

The new coalition will focus on advancing legal, policy, and accounting handling of digital assets while spotting risks associated with the absence of a proper regulatory framework relating to tokenization. The MAS said the collaboration will encourage knowledge sharing, promote interoperability, and establish common standards across multiple jurisdictions.

“MAS’ partnership with FSA, FCA, and FINMA shows a strong desire among policymakers to deepen our understanding of the opportunities and risks arising from digital asset innovation,” said Leong Sing Chiong, Deputy Managing Director (Markets and Development).

“Through this partnership, we hope to promote the development of common standards and regulatory frameworks that can better support cross-border interoperability, as well as sustainable growth of the digital asset ecosystem,” added Chiong.

Back in June, MAS published a report highlighting initial successes for the interoperability of blockchain technology using asset-backed security tokens, digital native issuance of structured notes, and a global liquidity pool to reduce bottlenecks from over-the-counter (OTC) FX transactions.

Singapore advanced its plans to achieve regulatory clarity for digital assets by unveiling a new legal framework for stablecoins, requiring issuers to guarantee value stability and a base capital level.

Tokenization gathers significant steam

Financial regulators worldwide are interested in tokenization to improve processes in the ecosystem, with a few early adopters recording early wins. Hong Kong’s foray with tokenized bonds via its Project Evergreen “showed the potential in DLT to enhance efficiency, liquidity, and transparency in bond markets.”

The successes of Project Evergreen have seen the Bank of England (BoE) brace itself for the rise of tokenized bank deposits, with Australia launching a public consultation into the offering. Brazil’s securities watchdog has lined up a tokenization pilot for 2024, citing use cases in agriculture and ESG.