The Monetary Authority of Singapore (MAS) has partnered with Wall Street titan JPMorgan to lead a pilot program to investigate the true potential of Decentralized Finance (DeFi).
Pilot Program to Investigate DeFi
The MAS’s Project Guardian is an initiative to learn how DeFi applications can enhance the borrowing and lending process while reducing risk factors. Mr. Heng Swee Keat, Singapore’s Deputy Prime Minister and Coordinating Minister for Economic Policies, launched the project on Tuesday at the Asia Tech x Singapore Summit.
As part of the initiative, MAS has collaborated with JPMorgan Chase to pilot a blockchain project that will investigate the potential of DeFi in wholesale funding markets. Experts believe that the MAS is undertaking this project in response to reports that Singapore’s strict regulations are driving crypto business away, particularly to more crypto-friendly Dubai.
Co-Leaders of the project
To co-lead the project, the MAS has enlisted the help of both Singaporean multinational bank DBS and local digital asset issuance startup Marketnode. The three major financial institutions will collaborate to establish a permissioned liquidity pool comprised of tokenized bonds and deposits. The pilot’s goal is to conduct secured borrowing and lending on a public blockchain-based network using smart contracts.
MAS’s Chief FinTech Officer – Sopnendu Mohanty, commented on the project, that MAS was meticulously observing innovations and development in the digital asset ecosystem, as well as working through the possible opportunities and risks that new technologies bring to consumers, investors, and the financial system as a whole… The lessons learned from Project Guardian will help policymakers understand the regulatory safeguards required to reap the benefits of DeFi while reducing its risks.
The four major areas of interest
In addition to testing the feasibility of institutional-grade DeFi protocols, Project Guardian will develop and execute use cases in three other major areas. To begin, it will look at how public blockchains can be used to create open, interoperable networks that permit digital assets to be traded across platforms and liquidity pools.
Second, the project will investigate the use of independent trust anchors to create a trusted environment for the implementation of DeFi protocols. Essentially, regulated financial institutions serve as trust anchors, screening, verifying, and authenticating entities interested in participating in DeFi protocols. Third, the project will investigate the use of tokenized deposits issued by financial institutions on the public blockchain.
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