Asset Tokenisation, First Pilot, and More: An Overview of Singapore’s Project Guardian

Inflation, employment rate, and market price are economic indicators that affect the market’s liquidity. If these factors go way beyond projections, the market may become volatile or unstable. As an alternative to traditional investments, blockchain-enabled digital assets like cryptocurrencies recently showed sharp movements in trading prices.

Volatility in the market means the risk of losses is higher. Nevertheless, crypto continues to gain traction.

As Asia's leading fintech hub in Asia, Singapore is banking on this trend with the launch of “Project Guardian.” Led by the Monetary Authority of Singapore (MAS) and the finance industry, this project aims to explore the economic potential and value-adding use cases of asset tokenisation. Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat announced the initiative during the Asia Tech X Singapore Summit on May 31, 2022.

Here are some important things you need to know about Project Guardian:

Asset Tokenisation and Decentralised Finance (DeFi)

This project is designed to “test the feasibility of applications in asset tokenisation and decentralised finance” while managing the risks, Heng said during the commencement last May. He also mentioned the city-state's openness to the potential utilities and opportunities of Web 3.0.

First Pilot

The first pilot of the Project Guardian was led by its partners, DBS Bank, JP Morgan, and Marketnode and involved the creation of a permitted liquidity pool including tokenised bonds and

deposits. The initial phase is expected to build security in terms of “borrowing and lending on a public blockchain-based network through the execution of smart contracts”.

“This pilot is also pivotal as it furthers efforts to innovate, advance and scale institutional financial applications on blockchain and their interoperability across different blockchain networks with the long-established rails of the existing financial markets. We believe that these early explorations in DeFi solutions will ensure the competitiveness and relevance of Singapore as a cutting edge financial centre,” Heng said.

To ensure reliable security during the execution of DeFi protocols, MAS also plans regulated and verified blockchain entities, while providing "information on regulatory safeguards and controls of DeFi protocols to guard against market manipulation and operational risk.”

Four Main Areas of Research

Open, interoperable networks

An open network means it is interoperable or able to be integrated with different networks or technology. Through interactive collaboration and modified processes, Project Guardian can make use of public blockchains connected to digital assets to be traded across various platforms and liquidity pools.

Trust Anchors

Trust anchors in organisations are built to ensure an encrypted and private ecosystem across the blockchain ledger. In this initiative, trust anchors are expected to screen and verify issues on credentials to entities or financial institutions interested in participating in DeFi protocols.

Asset Tokenisation

Asset tokenisation is about the automation and wire traceability of the life of the asset. Project Guardian aims to “build upon existing token standards, incorporate trust anchor credentials and enable asset-backed tokens to be interoperable with other digital assets used in DeFi protocols on the open networks.”

Institutional Grade DeFi Protocols

Personal financial management is made possible with DeFi, a platform that enables users to use decentralised mobile applications to manage their assets, such as digital wallets and private keys.

Singapore's Project Guardian continues to assess its regulations, ensuring that DeFi protocols are protected and controlled in order to prevent market manipulation, which could lead to operational risk. Other areas concerned are auditing capabilities and code vulnerabilities.