The Monetary Authority of Singapore (MAS) has announced an expansion of initiatives to advance asset tokenisation within financial services. This effort includes partnerships with global industry associations and financial institutions to establish common standards for asset tokenisation in fixed income, foreign exchange (FX), and asset & wealth management. Additionally, MAS and international financial institutions have completed the first phase of the Global Layer One (GL1) initiative, which aims to develop standards, market practices, and governing principles for foundational digital infrastructure for tokenised assets.
Development of Industry Standards and Risk Management Frameworks
Over the past two years, MAS collaborated with 24 financial institutions to pilot asset tokenisation use cases under Project Guardian. These institutions include asset managers, market operators, custodians, credit rating agencies, and commercial banks. To further these efforts, MAS has welcomed the Global Financial Markets Association (GFMA), International Capital Market Association (ICMA), and the International Swaps and Derivatives Association (ISDA) as the first global industry associations to join Project Guardian’s industry group.
Building on previous industry pilots, three workstreams have been established to develop standards and frameworks across key asset classes:
- Fixed Income Workstream: In collaboration with ICMA, this workstream will develop protocols and data specifications based on ICMA’s Bond Data Taxonomy, and consider necessary risk factors and disclosures for tokenised bond offerings. GFMA will partner to develop standard clauses for implementing smart contracts in fixed income products.
- FX Workstream: Working with ISDA and the Global Foreign Exchange Division (GFXD) of the GFMA, this group will focus on developing FX data specifications, risk management frameworks, and FX documentation.
- Asset & Wealth Management Workstream: This workstream will collaborate with global custodians and asset managers to create common data models and address risk considerations specific to fund tokenisation.
Development of Shared Ledger Infrastructure
To scale tokenised asset transactions globally, a shared ledger infrastructure is necessary to host multiple types of tokenised financial assets while meeting regulatory requirements and maintaining the policy autonomy of participating jurisdictions. Under the GL1 initiative, MAS is collaborating with international policymakers and financial institutions, including BNY Mellon, Citi, J.P. Morgan, MUFG Bank, and Societe Generale-FORGE (SG Forge). The business, governance, risk, legal, and technology aspects of a shared ledger infrastructure are under consideration.
A whitepaper detailing the design principles, objectives, considerations, and potential uses of GL1 was published today. The next phase of GL1 will expand collaboration with more policymakers, central banks, regulators, international standards-setting bodies, and financial institutions. There are plans to establish a non-profit organisation (GL1 Org) to develop common principles, policies, and standards for operating a global shared ledger infrastructure. This will complement the potential future establishment of independent operating companies to build and deploy the GL1 infrastructure.
Statements from Key Participants
Mr. Leong Sing Chiong, Deputy Managing Director (Markets and Development) at MAS, stated, “Project Guardian provides a useful platform for central banks, regulators, and financial institutions to understand the opportunities and risks of asset tokenisation in a safe environment. The GL1 initiative is an important next step to realize the potential of asset tokenisation and improve efficiencies in capital markets.”
Ms. Caroline Butler, Global Head of Digital Assets at BNY Mellon, expressed, “We are pleased to collaborate with MAS and our industry peers on this unique GL1 initiative that combines resiliency, risk management, and innovation through blockchain technology.”
Mr. Puneet Singhvi, Global Head of Citi Digital Assets, remarked, “We are excited to partner with MAS and other financial institutions on the GL1 initiative. Digital assets have the potential to bring new capabilities and efficiencies across the financial value chain.”
Mr. Naveen Mallela, Global Head of Coin Systems and Liink at Onyx by J.P. Morgan, said, “At Onyx, we believe in the benefits of bringing multiple currencies, assets, and financial applications onto a global shared ledger infrastructure.”
Mr. Masashi Watanabe, Managing Director of the Digital Strategy Division at MUFG Bank, noted, “We are excited to be part of the GL1 initiative and share the whitepaper, which outlines essential aspects for actualizing shared ledger infrastructure.”
Mr. Jean-Marc Stenger, Chief Executive Officer of SG Forge, commented, “GL1 presents an opportunity to scale Distributed Ledger Technology (DLT)-based use cases for regulated financial institutions, creating an interoperable environment for onchain securities and payments transactions.”
Image by Roce Vu from Unsplash
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