The Monetary Authority of Singapore (MAS), which is the leading financial watchdog in Singapore, plans to investigate potential use cases in the decentralized finance sector. This is part of an effort by the city-state to establish itself as a leading DeFi hub after several key players in the crypto sector left.
Details of the Singapore Collaboration
The MAS will seek to make headway in the DeFi sector via “Project guardian,” which will be a joint effort between the authority, and leading financial firms in the country. Through this project, MAS will test the feasibility of asset tokenization and DeFi, while working to mitigate risk to the financial stability of the city-state.
Areas of Collaboration
According to a statement by Heng Swee Keat, the Deputy Prime Minister and Coordinating Minister for Economic Policies, the focus of this project will be on four main areas. The first one of these four areas is the exploration of open and interoperable networks. Via this project, the MAS will explore the use of public blockchains to create open, interoperable networks, which enable the trading of digital assets across liquidity pools, and platforms.
Another area of investigation will be trust anchors. The MAS will seek to establish a trusted environment where DeFi protocols can be executed via a common trust layer of independent trust anchors. These trust anchors would be regulated financial firms, which screen, verify, and issue verifiable credentials to entities that want to be part of a DeFi protocol.
The other area of focus will be asset tokenization. In this area, the MAS will try to examine the creation of securities as tokenized assets issued by a deposit-taking institution on a public blockchain. The aim will be to build on existing token standards, incorporate trust anchor credentials, and enable interoperability of asset-backed tokens on DeFi protocols on open networks.
Finally, the project will focus on institutional-grade DeFi protocols. They will study the introduction of regulatory safeguards into DeFi protocols, which will mitigate against market manipulation, and reduce operational risk. Additionally, Project Guardian will examine how smart contract auditing capabilities can be used to detect code flaws.
Developing a DeFi Hub Amidst Mass Exodus
The MAS is seeking to develop a DeFi hub amid a crypto mass exodus. Crypto and blockchain companies have been fleeing the city-state after it introduced a raft of tough rules on crypto advertising. Crypto advertising is essentially banned in Singapore. Besides that, the rules imposed on the crypto sector have been toughened up to protect consumers from crypto scammers. Despite these tough rules, crypto adoption in Singapore has continued to grow.
It would appear that the MAS is committed to ensuring that Singapore becomes a leading hub for the DeFi sector in Southeast Asia and globally by establishing Project Guardian. This commitment would be on a global scale. Project Guardian will be an important factor in informing future policy decisions for the city-state, despite the fact that the actualization of this goal will take years of time. It is difficult to wish cryptocurrency away when such a large percentage of the population is interested in it.
