While initially, governments around the world ignored cryptocurrencies/digital currencies, they have still shown massive growth in popularity. Bitcoin has been the headline act, leading the way as the rest follow. While Singapore has always been interested in digital currencies, the recent announcement by the Monetary Authority of Singapore (MAS) could lead to monumental changes.


Industry collaboration


The MAS has launched an extensive industry collaboration called “Project Guardian”. The idea is simple. In tandem with financial giants such as DBS Bank, JPMorgan Chase & Co and Marketnode Pte, the project will examine the practical challenges of introducing digital currency. This will include:-


• Assessing/managing financial stability
• Investigating integrity risks with public blockchains


While many governments/central banks have talked about introducing a digital currency, few have followed through with their promises. 


Pilot schemes


In a move which could certainly prompt other governments/central banks to follow, Project Guardian will be focusing on four main areas:-


• Interoperable networks
• Trust anchors
• Asset tokenisation
• Industrial grade DeFi


The key to introducing digital currency into mainstream financial markets will revolve around DeFi (Decentralised Finance). All eyes will be on the potential use of DeFi in the wholesale money markets, central to national and global economies.


Wholesale funding markets


This project has the potential to revolutionise wholesale funding markets, creating a practical permission-based liquidity pool. While access will be limited in the early days, this element of the project will look closely at the practical challenges facing the introduction of:-


• Tokenised bonds/deposits
• Lending/borrowing via public blockchains
• Smart contracts


Even during its limited life, the digital asset market has already demonstrated the value of smart contracts and the relative ease with which they can be introduced. This is undoubtedly a brave and headline-grabbing move by the MAS but one which many believe is overdue.


All eyes on digital currency markets


Those who follow the financial markets will be well aware of the ongoing challenges facing many digital currencies and so-called stablecoins. While there has been extreme volatility in the past, the current market malaise is by far and away the most significant challenge yet. Even though we are likely to see many digital currencies fall by the wayside, as a consequence of ongoing volatility/uncertainty, those that survive will be strengthened.


If public bodies such as the MAS eventually supported the introduction of a Singapore digital currency, this would alleviate many of the current market concerns. Even thoughmany people have made significant returns investing in digital assets, the recent market rout has increased concern amongst regulators.


Regulations will follow


Undoubtedly, digital currency based regulations will follow, probably sooner rather than later, allowing the market to move into the mainstream. Under a well-defined regulatory umbrella, this could lead to a considerable increase in investment funding in this area. 


After a relatively quiet period, it looks as though the Singapore authorities now have the bit between their teeth. How will other central banks and governments react? Will they really leave the way clear for Singapore to become a major digital currency hub?

Back to News