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MAS to test DeFi applications in wholesale funding markets

MAS to test DeFi applications in wholesale funding markets

The Monetary Authority of Singapore is collaborating with JPMorgan, DBS Bank and Marketnode to explore the use of digital assets in tokenization and DeFi.

Dubbed Project Guardian, the central bank will run pilot tests in four areas to test the feasibility of applications covering blockchain, trust anchors, asset tokenization and institutional-grade DeFi protocols.

Sopnendu Mohanty, chief fintech officer, MAS, says: “Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding in this rapidly transforming digital assets ecosystem. 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.”

The first industry pilot will explore potential DeFi applications in wholesale funding markets. The tests, led by DBS Bank, JP Morgan and Marketnode, involves the creation of a permissioned liquidity pool comprising tokenised bonds and deposits. The pilot aims to carry out secured borrowing and lending on a public blockchain-based network through execution of smart contracts.

Martin Pickrodt, CEO of Marketnode, comments: "Through Project Guardian, we aim to address real market issues, such as fragmented liquidity venues, high intermediation costs and transaction inefficiencies, and are looking forward to the journey ahead."

MAS is seeking further input from the industry around all four pilot processes and invites interested parties to submit proposals to the FinTech Regulatory Sandbox for live experimentation.

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