The Monetary Authority of Singapore (MAS) has teamed up with Wall Street giant JPMorgan to lead a pilot program exploring the true potential of Decentralized Finance (DeFi).
Pilot Program To Explore DeFi
The Project Guardian is an initiative undertaken by the MAS to understand how DeFi applications can improve the borrowing and lending process while mitigating risk factors. The project was launched at the Asia Tech x Singapore Summit on Tuesday by Mr. Heng Swee Keat, the Deputy Prime Minister and Coordinating Minister for Economic Policies of Singapore. As a part of the initiative, MAS has partnered up with JPMorgan Chase to pilot a blockchain project that will delve deeper into the potential of DeFi in wholesale funding markets. Experts believe that the MAS has undertaken this project due to the word around the blockchain that Singapore’s tight regulations are driving crypto business away, especially to the more crypto-friendly Dubai.
DBS x Marketnode x JPMorgan
The MAS has also roped in the assistance of both the Singaporean multinational bank DBS and the local digital asset issuance startup Marketnode to co-lead the project. The three leading financial institutions will together create a permissioned liquidity pool consisting of tokenized bonds and deposits. The goal of the pilot is to conduct secured borrowing and lending on a public blockchain-based network through the execution of smart contracts.
Sopnendu Mohanty, Chief FinTech Officer of MAS, shared 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’s Four Main Areas Of Interest
Besides testing the feasibility of institutional-grade DeFi protocols, the Project Guardian will also develop and implement use cases in three other main areas. Firstly, it will explore how public blockchains can be leveraged to build open, interoperable networks that allow digital assets to be traded across platforms and liquidity pools.
Secondly, the project will also look into leveraging independent trust anchors to set up a trusted environment for the execution of DeFi protocols. Basically, regulated financial institutions act as trust anchors to screen, verify, and authenticate entities that want to participate in DeFi protocols. And thirdly, the project will also look into the use of tokenized deposits issued by deposit-taking institutions on the public blockchain.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
