Singapore Uses DeFi to Trade Government Securities

Decentralized finance (DeFi) technology has been used in Singapore to trade tokenized state bonds and other securities issued by the country’s government, as well as foreign exchange and other financial instruments. 

Singapore Uses DeFi to Trade Government Securities

The Monetary Authority of Singapore (MAS) announced the launch and initial successes of Project Guardian, aimed at exploring the economic potential and scenarios for asset tokenization.

Financial giants DBS Bank, JP Morgan, and SBI Digital Asset Holdings take part in Project Guardian. Singapore’s MAS said the project has already conducted its first transactions using tokenized Singapore government securities (SGS), the Singapore dollar (SGD), Japanese government bonds and the Japanese yen (JPY).

Project Guardian uses smart contracts from DeFi platforms to make financial transactions without intermediaries. The first transfers in the pilot have shown that cross-currency transactions of tokenized assets through DeFi reduce the cost of clearing and settlement intermediaries.

Project Guardian’s roadmap includes:

  1. Conducting trials with financial and fintech institutions in Singapore and beyond to develop scenarios for using asset tokenization for financial services.
  2. Studying the implications of tokenized asset transactions, risk management, and the development of a regulatory framework for institutional DeFi structures.
  3. Developing technology standards to make digital assets interoperable with the country’s traditional financial system and optimize cross-border transactions using tokenized assets.

Project Guardian is deployed on Polygon, which reduces gas costs. Aave, a DeFi lending platform, and Uniswap, a decentralized exchange, were chosen as platforms for trading tokenized state assets.

According to Han Kwee Juan, Head of Strategy at DBS Bank, using smart contracts and DeFi technology has unlimited potential within cross-border trading, as they allow “laying the foundations for building global institutional liquidity pools.”

Recall that DBS Bank is working closely with the Singapore government. It was recently reported that the financial giant is involved in the Orchid project, seeking to explore the possibility of issuing a retail CBDC. As part of the project, DBS Bank will design and issue purpose-bound money-based vouchers (PBMs).

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