MAS Turns Focus on DeFi Use Cases and Curbing of Digital Fraud
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
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
