The Monetary Authority of Singapore (MAS), yet another supervisory authority intensifying focus on curbing frauds, has set out additional measures (effective from October 31, 2022) for fraud detection and enhancing the security of digital banking. The Authority also issued guidelines setting out the requirements that banks should adhere to when operating under a wholesale banking license in Singapore. Finally, MAS announced Project Guardian, wherein it will partner with the industry to pilot use cases in digital assets.
Project Guardian is a collaborative initiative with the financial industry to explore the economic potential and value-adding use cases of asset tokenization. Tokenization is the process of digitally representing assets or items of value through a smart contract on a blockchain. This allows high-value financial and real economy assets to be fractionalized and exchanged over the internet on a peer-to-peer basis. When applied in the context of financial services, such smart contracts enable Decentralized Finance (DeFi), where financial transactions such as borrowing, lending, and trading activities can be performed autonomously on a blockchain without the need for intermediaries. Project Guardian will test the feasibility of applications in asset tokenization and decentralized finance while managing risks to financial stability and integrity. MAS aims to develop and pilot use cases in four main areas:
- Open, interoperable networks—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.
- Trust anchors—Establish a trusted environment for the execution of decentralized finance 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 decentralized finance protocols.
- Asset tokenization—Examine the representation of securities in the form of digital-bearer assets and the use of tokenized deposits issued by deposit-taking institutions on public blockchains. The project aims to build on existing token standards, incorporate trust anchor credentials, and enable asset-backed tokens to be interoperable with other digital assets used in decentralized finance protocols on the open networks.
- Institutional grade decentralized finance protocols—Study the introduction of regulatory safeguards and controls into decentralized finance 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.
Keywords: Asia Pacific, Singapore, Banking, Digital Assets, Decentralized Finance, Lending, Financial Stability, Blockchain, Smart Contracts, Fintech, Regtech, Fraud Detection, MAS
Previous ArticleCBIRC Issues Green Finance Guidelines for Banks and Insurers
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.