Singapore introduces frameworks to commercialize tokenization in financial markets

Singapore regulators plan to advance tokenization efforts as the industry witnesses a rise in demand for tokenized assets in fixed income, foreign exchange and asset management markets.

In an announcement on Nov. 4, the Monetary Authority of Singapore announced its intention to promote the commercialization of tokenized assets by improving market infrastructures, deepening liquidity and creating industry frameworks to support cross-border transactions.

According to MAS deputy director general Leong Sing Chiong, the country has “seen strong interest in asset tokenization in recent years, especially in fixed income, foreign exchange and asset management.”

To support this interest and enable wider adoption, MAS has introduced two frameworks, the Guardian Fixed Income Framework, which will provide guidelines for the tokenization of fixed income assets in line with global standards. The Guardian Funds Framework outlines best practices for creating tokenized investments. funds.

Developed by industry group Project Guardian, these frameworks are the latest step in Singapore’s tokenization efforts under Project Guardian. Launched in 2022, the initiative brings together more than 40 financial institutions, associations and policymakers across seven regions to increase liquidity and efficiency in financial markets through tokenization.

The announcement noted that Project Guardian has conducted more than 15 industry trials to date, across six currencies and multiple financial products, focusing on asset tokenization applications in capital markets.

MAS has since moved towards commercializing these efforts through the establishment of the Guardian Wholesale Network, an industry group comprising Citi, HSBC, Standard Chartered, Schroders and UOB.

“With the intense participation of financial institutions and other policymakers, we encourage them to co-create industry standards and risk management frameworks to facilitate the commercial deployment of tokenized capital markets products and scale tokenized markets industry-wide,” Chiong added.

As part of its strategy, MAS is also creating a “common payment facility” to make tokenized asset transactions more secure by minimizing payment risks using regulated and trusted payment options such as wholesale central bank digital currency such as the Singapore Dollar.

Singapore has established itself as a major hub for cryptocurrency activities by adopting a progressive yet cautious regulatory framework. While MAS has consistently warned locals about crypto risks and tightened regulations on digital payment token services, it has also encouraged regulated crypto operations in the country by licensing many crypto firms.

In particular, MAS issued a Major Payment Institution license to Hex Trust and OKX, allowing these firms to provide digital payment token services and cross-border money transfers. Crypto exchange Gemini recently received in-principle approval and is currently working with the regulator to obtain a full licence.