Singapore unveils frameworks to promote the commercialization of tokenization in financial markets.

Singapore’s regulators are set to enhance tokenization efforts in response to the growing demand for tokenized assets in markets such as fixed income, foreign exchange, and asset management.

In a November 4 announcement, the Monetary Authority of Singapore (MAS) outlined its plans to foster the commercialization of tokenized assets by developing market infrastructures, increasing liquidity, and creating industry frameworks that facilitate seamless cross-border transactions.

Leong Sing Chiong, deputy managing director of MAS, noted that there has been significant interest in asset tokenization in recent years, particularly in areas like fixed income, FX, and asset management. To address this demand and promote broader adoption, MAS has introduced two new frameworks: the Guardian Fixed Income Framework, which provides guidelines for tokenizing fixed-income assets in line with global standards, and the Guardian Funds Framework, which outlines best practices for establishing tokenized investment funds.

These frameworks were developed by the Project Guardian industry group, part of Singapore’s broader tokenization initiative launched in 2022. Project Guardian aims to enhance liquidity and efficiency in financial markets through tokenization, bringing together over 40 financial institutions, associations, and policymakers across seven jurisdictions. So far, Project Guardian has conducted more than 15 industry trials across six currencies and various financial products, focusing on the applications of asset tokenization in capital markets.

In addition to these frameworks, MAS is moving to commercialize its efforts through the establishment of the Guardian Wholesale Network, which includes major financial players such as Citi, HSBC, Standard Chartered, Schroders, and UOB. Chiong expressed optimism about the active participation of financial institutions and policymakers in creating industry standards and risk management frameworks to support the commercial deployment of tokenized capital market products.

As part of its strategy, MAS is also developing a “common settlement facility” to enhance the safety of tokenized asset transactions by reducing settlement risks through regulated and reliable settlement options, including a wholesale central bank digital currency like the Singapore Dollar.

Singapore has positioned itself as a key hub for cryptocurrency activities, adopting a progressive yet cautious regulatory framework. While MAS has consistently warned about the risks associated with crypto and has tightened regulations for digital payment token services, it has also granted licenses to several crypto firms, fostering a regulated environment for crypto operations. Recently, MAS issued a Major Payment Institution license to Hex Trust and OKX, enabling these firms to provide digital payment token services and facilitate cross-border money transfers. Additionally, crypto exchange Gemini has received in-principle approval and is currently working towards obtaining a full license from the regulator.