The Monetary Authority of Singapore (MAS) has proposed an initiative to create an open and interoperable framework. This is to facilitate collaboration with the Bank for International Settlements (BIS), HSBC and other financial institutions.
The tokenized assets will be based on distributed ledger technology (DLT) and smart contract technology to harness the great potentials of these technologies. The report emphasized that assets are currently managed in a fragmented manner, but tokenization can bring everything together.
“Traditionally, financial and real economy assets are represented physically or through account balances on various proprietary platforms,” the report explained. “For instance, deposits are seen as balances in accounts at financial institutions, while securities such as bonds are held in accounts with Central Securities Depositories.”
By tokenizing assets, users will be able to carry out peer-to-peer (P2P) transactions, which makes transactions easier and smoother.
“Distributed ledgers offer the potential for peer-to-peer transactions without the need for centralized intermediaries, and smart contracts enable autonomous execution of financial transactions,” the report stated.
Distributed ledger technology is the technology that underpins decentralized cryptocurrencies such as Bitcoin. Many governments have considered adopting a form of the technology, but only to be used for central bank digital currencies (CBDCs). Singapore seems to be taking a different approach by encouraging tokenization and the use of DLT.
Singapore Embracing Financial Advancement
Singapore has been a friendly place for cryptocurrencies for years. Its regulations also permit the industry to thrive, so it has attracted many crypto companies such as Crypto.com. The push for asset tokenization by the regulatory agency is therefore not a surprise.
Further, MAS had on June 21 released a white paper on a protocol called Purpose-Bound Monday, which is a digital currency that can be programmed via smart contracts for any specific use case.
“Our blueprint for a new class of platforms would (ensure) greater interoperability, efficiency, and safety in cross-border payments, as well as in domestic financial markets,” the whitepaper said.
This is also in line with the IMF’s plans to create a platform called XC platforms, that allows for easier and faster cross-border payments in any given currency.
“The cost, sluggishness, and opacity of cross-border payments come from limited infrastructure,” the IMF said in a statement. This suggests that projects like XC platforms, Purpose-Bound Money and Project Guardian work to use blockchain technology to improve infrastructure and accessibility.
Singapore Leading in Decentralized Innovation
As Singapore has been ahead in its embrace of crypto and DLT, that automatically puts the country ahead of the curve in terms of leading innovation in the blockchain space.
With initiatives like Purpose-Bound Money, Singapore will be among the first countries to embrace asset tokenization, which is a remarkable development considering the fact that many countries are actively fighting crypto innovation right now.