MAS Launches Pilot Blockchain Project To Investigate Potential Benefits Of DeFi & Safeguards Required

MAS Launches Pilot Blockchain Project Named Project Guardian On 31 May

As more Singaporeans start exploring cryptocurrencies and other aspects of the Decentralised Finance (DeFi) space, the authorities are keeping an increasingly close eye on such projects and how they can implement measures to safeguard stakeholders.

During the Asia Tech x Singapore Summit on Tuesday (31 May), Deputy Prime Minister (DPM) Heng Swee Keat launched a new blockchain project by the Singapore central bank.

Named Project Guardian, the initiative will allow the Monetary Authority of Singapore (MAS) to study how it can harness the benefits of DeFi while looking at the measures required to safeguard users and mitigate related risks.

MAS launches blockchain project to test feasibility of asset tokenisation & DeFi

According to MAS, Project Guardian was launched with the aim of testing the feasibility of asset tokenisation and DeFi while “managing risk of financial stability and integrity”.

For those who may not be familiar with the space, here are MAS’ definitions of the terms in bold:

• Tokenisation: Process of digitally representing assets or items of value on a blockchain via a smart contract
• DeFi: financial transactions that can be performed autonomously on a blockchain without intermediaries

Project Guardian aims to develop and pilot use cases in four main areas:

• Open and interoperable networks
• Trust anchors that screen, verify, and issue credentials to entities that want to participate in DeFi protocols
• Asset tokenisation
• Introduction of regulatory safeguards and controls into DeFi protocols

The first industry pilot under Project Guardian will be led by DBS Bank, JP Morgan, and Marketnode. The project will look into potential DeFi applications in wholesale funding markets by creating a “permissioned liquidity pool” of tokenised bonds and deposits.

Moving forward, MAS is also welcoming more industry initiatives that address the four areas of interest central to Project Guardian.

Heng Swee Keat advises retail investors to steer clear of cryptocurrencies

Speaking at the summit, Mr Sopnendu Mohanty, Chief FinTech Officer of MAS, said the Singapore central bank is monitoring innovations and growth in the digital asset space. At the same time, they’re also looking into the potential opportunities and risks that the new technologies present to stakeholders.

Echoing his sentiments was DPM Heng, who also serves as Coordinating Minister for Economic Policies.

While calling it a “highly risky space”, Mr Heng said that cryptocurrency assets have the potential to transform the future of finance.

Hence, Mr Heng said Singapore’s regulations must promote innovation, but at the same time address risks associated with crypto assets.

For retail investors, however, the message is more straightforward,

Retail investors especially should steer clear of cryptocurrencies. We cannot emphasise this enough.

Mr Heng also noted the recent saga surrounding the LUNA ecosystem, which caused many to suffer huge losses and in some cases, even their life savings.

Glad authorities are approaching it with an open mind

As more Singaporeans start dabbling in cryptocurrencies and exploring the DeFi space, perhaps some form of regulation is necessary to safeguard stakeholders’ interests.

Though such financial services do come with their share of risks, we’re glad the authorities are approaching it with an open mind.

We hope the new initiative will allow the authorities to better understand the decentralised space and enact policies to protect stakeholders in the country.

Have news you must share? Get in touch with us via email at news@mustsharenews.com.

Featured image adapted from Central Banking.