MAS launches Project Guardian

Project Guardian was launched by Mr Heng Swee Keat, Deputy Prime Minister and Coordinating Minister for Economic Policies, at the Asia Tech x Singapore Summit.

Tokenisation is the process of representing assets or items of value through a smart contract on a blockchain. This allows high value financial and real economy assets to be fractionalised and exchanged over the internet on a peer-to-peer basis. When applied in the context of financial services, such contracts enable Decentralised Finance (DeFi), where financial transactions such as borrowing, lending, and trading activities can be performed autonomously on a blockchain without the need for intermediaries. It could potentially improve the efficiency, accessibility, and affordability of financial services, increase liquidity in financial markets, and improve economic inclusion.

Project Guardian will test the feasibility of applications in asset tokenisation and DeFi while managing risks to financial stability and integrity. MAS aims to develop and pilot use cases in four main areas.

Firstly, it aims to explore the use of public blockchains to build open, interoperable networks that enable digital assets to be traded across platforms and liquidity pools. This includes interoperability with existing financial infrastructure. Open, interoperable networks can mitigate against the formation of walled gardens in digital exchanges and fragmented private markets.

Secondly, it wants to stablish a trusted environment for the execution of DeFi protocols through a common trust layer of independent trust anchors. Trust anchors are regulated financial institutions that screen, verify and issue verifiable credentials to entities that wish to participate in DeFi protocols.

Thirdly, it aims to examine the representation of securities in the form of digital bearer assets and the use of tokenised deposits issued by deposit-taking institutions on public blockchains. The project aims to build upon existing token standards, incorporate trust anchor credentials and enable asset-backed tokens to be interoperable with other digital assets used in DeFi protocols on the open networks.

Lastly, it studies the introduction of regulatory safeguards and controls into DeFi protocols to mitigate against market manipulation and operational risk. The project will also examine the use of smart contract auditing capabilities to detect code vulnerabilities.