With the rise in crypto adoption across the globe, it was expected that institutions would include themselves somewhere down the line. The massive boost to the crypto space, which came to being after Satoshi Nakamoto introduced Bitcoin to the world back in 2009, was revolutionary. Various countries are already exploring CBDCs and looking into ways to regulate the new asset class!
One of the main agendas of the G-20 Presidency, hosted by India this time, is to look into a cumulative way of regulating the crypto asset space.
Stani Kulechov, the founder of Aave, commented that MAS; also known as the Monetary Authority of Singapore, which is a decentralized finance pilot program; just executed “the first real-world use case for institutional-grade DeFi protocols.” On Wednesday, November 3rd, 2022, institutions like J.P. Morgan, DBS Bank and SBI Digital Asset Holdings explored using the Aave Protocol on Polygon in order to complete foreign exchange and government bond transactions on the Ethereum network. As a test to explore more on this agenda, the said banks made an exchange of the tokenized versions of Singapore government securities bonds for Japanese government bonds. Apart from the bonds, the experiment also included the exchange of Japanese Yen for Singapore Dollars!
Based on the experiments that are being done, Stani Kulechov said to Decrypt, “We look forward to welcoming more innovation that leverages composable DeFi protocols to provide access to many underserved markets and enable a more inclusive system.”
To this, the founder of Polygon (MATIC) took to Twitter to express his optimism.
Hardcore financial institutions are being increasingly comfortable in experimenting with public blockchains.
Eventually some of them are going to crack the use-cases which adds value to their core business models and that will potentially open up floodgates for #MassAdoption
— Sandeep | Polygon 💜🔝3️⃣ (@sandeepnailwal) November 2, 2022
Back in May 2022, Project Guardian announced the introduction of MAS. Since then MAS has been busy engaging in the financial industry in order to identify key areas that can be helped with its collaboration. Some of the agendas that are being targetted ever since include:
- Industry pilots with various financial institutions and FinTechs within Singapore and other jurisdictions. This action is aimed to bring about good asset tokenization use cases for the financial services and identify opportunities to unlock economic value, and surface potential risk management issues.
- The announcement mentioned, studying regulatory and risk management implications of tokenized asset transactions, such as the regulatory treatment of tokenized liabilities and appropriate governance for institutional DeFi structures, to promote oversight and accountability.
- The MAS programs also aim to explore technology standards that can support interoperability across the digital asset ecosystems along with the potential to facilitate cross-currency transactions of tokenized assets. However, to execute this, the project first need to establish a common identity and access framework that is supported by trust anchors along with issuing verifiable credentials to entities that wish to participate in the DeFi protocols.
The Head of capital markets at Celent, Monica Summerville commented, “DeFi ranked as the top feature after custody and execution when considering which digital asset custodian to work with. However, echoing some of the findings of this pilot, our study also found that interoperability ranked as a top three concern around digital representations of cash on the blockchain.”
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