Singapore Central Bank Joins JPMorgan, DBS in DeFi Adoption

The Singapore Monetary Authority (MAS) has partnered with Wall Street giant JPMorgan to undertake a pilot initiative examining the true possibilities of decentralized finance (DeFi).

The MAS has launched Project Guardian to better investigate how DeFi applications may improve the borrowing and lending process while reducing risk factors. Mr. Heng Swee Keat, Singapore’s Deputy Prime Minister and Coordinating Minister for Economic Policies announced the project at the Asia Tech x Singapore Summit on Tuesday. As part of the program, MAS has teamed up with JPMorgan Chase to test a blockchain project that will look at the potential of DeFi in the wholesale finance sector. Experts believe the MAS is working on this initiative because word on the blockchain is that Singapore’s strict restrictions are driving crypto firms away, particularly to Dubai, which is more crypto-friendly.

The MAS has enlisted the help of DBS, a Singaporean multinational bank, and Marketnode, a local digital asset issuing firm, to co-lead the project. The three major financial institutions will collaborate to construct a Permissioned Liquidity Pool that will include tokenized bonds and deposits. The pilot’s purpose is to conduct secured borrowing and lending on a public blockchain-based network through smart contract execution.

MAS’s Chief FinTech Officer, Sopnendu Mohanty, gave his thoughts on the project, saying:

“MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies – to consumers, investors and the financial system at large. The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi, while mitigating its risks.”

Project Guardian will design and implement use cases in three primary areas in addition to proving the viability of institutional-grade DeFi protocols. It will first look at how public blockchains can be used to create open, interoperable networks that enable digital assets to be traded across platforms and liquidity pools.

Second, the research will investigate the use of independent trust anchors to create a trustworthy environment in which DeFi protocols can be executed. Regulated financial institutions serve as trust anchors, screening, verifying, and authenticating entities interested in using DeFi protocols. Finally, the project will investigate the use of a public blockchain to store tokenized deposits issued by deposit-taking institutions.

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