S&P Global Ratings has recently joined the Monetary Authority of Singapore’s (MAS) ambitious Project Guardian, which aims to explore the potential of asset tokenization in improving the liquidity and efficiency of financial markets. The project, which has been running for two years, aims to establish standards and policy guidelines, as well as develop a commercially focused digital asset ecosystem. S&P Global will be participating in fixed-income pilot projects as part of their involvement in Project Guardian.
The fixed-income pilots involve conducting foreign exchange and bond transactions using liquidity pools of tokenized bonds and currencies. Additionally, participants are exploring repurchase agreements with digital bonds, developing a listing framework for debt securities, and even considering an initial token offering for digital tokens on the Singapore Exchange.
Another aspect of Project Guardian focuses on wealth management and foreign exchange on public blockchains, with the goal of achieving network interoperability. The project utilizes a modular network model consisting of four components.
Project Guardian was initiated by MAS in May 2022, with JP Morgan, DBS Bank, and SGX venture Marketnode as the initial participants. S&P Global is now the 24th member of the project’s industry group, which primarily consists of large banks and asset managers.
In addition to the industry group, there is also a policymakers’ group that includes government bodies from the United Kingdom, Japan, Singapore, Switzerland, and France, as well as the International Monetary Fund. Furthermore, there is a three-member international associations’ group involved in the project.
Tokenization is a key focus of Project Guardian, and it has already yielded some notable innovations. For example, JPMorgan executed a live cross-border transaction in November 2022 using tokenized Singapore dollars and Japanese yen on the Polygon blockchain. This marked the first time a major bank had conducted a decentralized finance trade on a public blockchain.
One particular innovation that has emerged from the project is the deposit token, which is a type of stablecoin issued by regulated and adequately supervised intermediaries. The Swiss Bankers Association and JP Morgan have recognized the advantages of the deposit token in terms of stability and its potential to integrate central bank digital currency into the traditional banking system.
Overall, Project Guardian is paving the way for the transformation of the financial industry through the exploration of asset tokenization and the development of a digital asset ecosystem.