On 27 June 2024, the Monetary Authority of Singapore (“MAS“) announced that it is expanding its initiatives to scale asset tokenisation for financial services. This includes partnering with global industry associations and financial institutions (“FIs“) to develop common asset tokenisation standards and frameworks across key asset classes, namely fixed income, foreign exchange (“FX“) and asset & wealth management.
MAS also announced the completion of Phase 1 of the initiative “Global Layer One (“GL1“)”. GL1 aims to facilitate seamless cross-border transactions and enable tokenised assets to be traded across global liquidity pools, while meeting relevant regulatory requirements and guidelines. To read more about GL1, refer to this link here.
Over the past two years, MAS has worked with various FIs to pilot promising asset tokenisation use cases. These FIs include asset managers, market operators, custodians, credit rating agencies and commercial banks.
Industry Standards and Risk Management Frameworks
MAS is working with global industry associations and FIs to develop industry standards and risk management frameworks under three workstreams across the following key asset classes:
(a) The Fixed Income workstream will work with the International Capital Market Association (ICMA) to develop protocols and data specifications building on ICMA’s Bond Data Taxonomy, and consider the types of risk factors and disclosures required in a tokenised bond offering document. Workstream members will also partner Global Financial Markets Association (“GFMA“) to develop standard clauses for implementing smart contracts for fixed income products.
(b) The FX workstream, in partnership with the International Swaps and Derivatives Association (ISDA) and the Global Foreign Exchange Division (GFXD) of the GFMA, will develop FX data specifications, risk management frameworks, and FX documentation.
(c) The Asset & Wealth Management workstream will deepen collaboration with global custodians and asset managers, focus on common data models, and model risk considerations specific to fund tokenisation.
Development of Shared Ledger Infrastructure
Under the GL1 initiative, MAS is collaborating with international policymakers and FIs on the business, governance, risk, legal and technology considerations of a shared ledger infrastructure that can host various kinds of tokenised financial assets while complying with the relevant regulatory requirements and keeping the policy autonomy of participating jurisdictions.
In Phase 2, GL1 will explore setting up a non-profit organisation (GL1 Org) to develop common principles, policies and standards for operating a global shared ledger infrastructure. This would support the potential future creation of independent operating entities that would develop and deploy the GL1 platform.
To read more about the details of the design principles, objectives, considerations and potential uses of GL1, please refer to this whitepaper.
Click on the following link for more information:
