DBS, a Singapore-based financial institution that operates across Asia, has announced that it has utilized permissioned DeFi liquidity pools on a public blockchain to test FX trading and government securities transactions.
According to DBS, the first industry pilot included JP Morgan, and SBI Digital Asset Holdings with a trade comprised of the outright purchase and sale of tokenized Singapore Government Securities (SGS), Singapore Dollar (SGD), Japanese Government Bonds, and Japanese Yen (JPY).
The initiative is part of Project Guardian, a collaborative effort with the financial industry that seeks to explore the economic potential and value-adding use cases of asset tokenization.
Han Kwee Juan, Group Head of Strategy and Planning, DBS, called the test a significant step towards laying the foundation of building global institutional liquidity pools to improve efficiencies and speed up transactions.
“This test trade has demonstrated that by harnessing the power of blockchain, the standards by which Financial Institutions currently deal with each other can be transformed and reimagined for greater efficiency and transparency,” stated Juan. “The ability to program smart contracts will reshape how execution can be achieved in a highly trusted manner, especially if it takes place in a permissioned market where all anonymous wallets are verified by trust anchors performing ‘Know Your Customer’ processes and trading is allowed to take place within that pool. This provides a springboard for the industry to further opportunities in the trading world.”
Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore (MAS), commented on the test:
“The live pilots led by industry participants demonstrate that with the appropriate guardrails in place, digital assets and decentralised finance have the potential to transform capital markets. This is a big step towards enabling more efficient and integrated global financial networks. Project Guardian has deepened MAS’ understanding of the digital asset ecosystem and has contributed to the development of Singapore’s digital asset strategy. We look forward to working with more institutions to advance global learning on policies, standards, and best practices for digital asset regulation and responsible innovation.”
Juan noted that the test allowed for instant trading (atomic), settlement, clearing and custody. This is indicative of the potential to improve upon the current process by boosting speed, improving security, and reducing risk.
“A highly liquid market attracts more investors and achieves efficiency gains by bypassing intermediaries. Currently, FX and government securities are primarily transacted in the Over-the-Counter markets involving multiple intermediaries resulting in friction in the settlement process.”
DBS noted that Singapore is the 3rd largest market in the world for FX trading.
DBS’ Trading and Markets business has executed other industry firsts, including a SGD 15 million digital bond reflecting an intent to pursue more digital securities offerings.
In recent days DBS announced an initiative to offer a digital, programmable Singapore dollar.