BACKGROUND

On November 4, 2024, the Monetary Authority of Singapore (“MAS”) announced its plan to reinforce its commitment to advancing tokenisation within financial services. In a keynote address by Deputy Managing Director Mr. Leong Sing Chiong at the Layer One Summit, he emphasized the benefits of tokenisation in financial services and outlined plans to foster commercialization by developing common industry standards. These initiatives are part of Singapore’s broader efforts to position itself as a global leader in digital finance through regulatory innovation and collaboration.

Key Points to Support Asset Tokenisation

To support the widespread deployment of tokenized assets, four key components are essential:

1. Enhanced liquidity in both primary and secondary markets to ensure asset viability.
2. Development of a resilient foundational digital infrastructure tailored to regulated financial institutions, enabling smooth transactions.
3. Establishment of standardized frameworks and protocols to encourage adoption and reduce technology-related costs.
4. Creation of common settlement assets like wholesale central bank digital currencies (“CBDCs”) to mitigate settlement risk and reduce market fragmentation.

Ongoing Initiatives of Asset Tokenisation

MAS is enhancing asset tokenisation in financial services to improve liquidity, market infrastructures, and industry frameworks. Key initiatives include the establishment of the Guardian Wholesale Network by major banks for commercializing tokenisation trials, the expansion of the Global Layer One (“GL1”) initiative for cross-border transactions, and the introduction of two industry frameworks for fixed income and funds. Additionally, MAS is facilitating access to common settlement assets, including a wholesale CBDC for testing, to promote the adoption and efficiency of tokenised assets in capital markets.

WHAT’S NEXT?

In this blockchain/decentralised finance space, managements of FIs should:

1. If they are already in the space – continue to strengthen their delivery infrastructure and enhance their AML/CFT operations.
2. If they are planning to enter into the space – to familiarise themselves with the Singapore regulatory regime and to ensure they have deep expertise before applying to MAS for the relevant license.

And more…

HOW CAN WE HELP?

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