Ladies and Gentlemen, Good Afternoon.
Introduction
1. It is my pleasure to join you at the Layer One Summit.
2. The summit launched a year ago with clear objectives. It aimed to promote deeper public-private sector conversations on ways to harness transformative technologies with finance, specifically in areas like AI and digital assets.
3. Through this open dialogue, MAS hopes to work with both central banks and regulatory counterparts, as well as global industry players to reap positive benefits from technology, while keeping financial services safe, trusted and inclusive.
4. Over the past year, there have been some significant developments in the digital asset space. Just in the last few months alone, we have seen –
a. The passage of the GENIUS Act in the US.
b. The Digital Euro moving into the next phase of development.
c. At SIBOS, SWIFT announcing plans to introduce a blockchain-based ledger.
5. Key financial institutions are also stepping up their own digital asset initiatives. Activity and momentum in this space are clearly gaining pace.
6. Last year, I outlined pathways for scaling tokenisation in financial services. I mentioned that for this to happen, tokenised activity needs to span across assets, key currencies, networks, and interoperating with existing systems. With recent developments, are we closer to achieving open and interoperable networks?
7. My own sense is that progress has been mixed, and there’s still some way to go before we can achieve this goal.
a. On the plus side, we see promising movements, with financial institutions moving from pilots and launching tokenised products on a commercial basis.
b. Financial institutions are also upping their capabilities to bridge between the traditional financial system based on fiat currencies, viz the digital asset space.
8. But overall progress remains uneven and patchy – across markets and within industries. And this unevenness itself can be an obstacle to achieving scale, particularly where it leads to fragmentation.
9. Last year, I also touched on creating common industry frameworks and taxonomies to enhance liquidity, developing foundational infrastructure to support tokenised asset transactions across networks, and developing common settlement assets.
10. These themes remain highly relevant today and during the course of this week, you will hear updates from MAS across the various areas.
11. For today, I would like to focus on two perspectives.
a. First, as we work towards open and interoperable networks, let’s not forget trust. Trust must remain the bedrock of finance. Technology has the potential to transform finance, but trust must underpin it.
b. Second, we need to have some idea what trusted, open and interoperable networks look like. Let me illustrate this:
12. Many of you would have just flown into Singapore this week. You likely took different airlines, different routes, arrived at Changi Airport in good time, and made your way through immigration, some with visas, others without.
13. This was possible because you were able to tap into an interconnected network of runways, terminals, control towers and ground services. It is a possible vision of what our digital financial ecosystem should aspire towards.
14. Like air travel, our digital financial ecosystem needs –
a. Seamless networks, like established flight routes to your favourite destination.
b. Sound infrastructure, like airports and supporting ground services.
15. Airport infrastructure and flight connectivity alone are not enough. Harmonised air traffic controls, standardised communication protocols and compatible navigation systems are essential for safe operations of thousands of daily flights.
16. Trusted, open and interoperable networks will not emerge by chance. Hard work and heavy lifting are required. Key public and private stakeholders must collaborate to develop standards, protocols and interoperability frameworks.
Seamless networks
17. For tokenisation to achieve its potential, we need global liquidity and good cross border financial networks. Let me share three key areas where we are fostering seamless networks.
18. First, for capital markets, we are building on the progress made under Project Guardian, and extending this for cross-border applications, involving multiple participants and multiple types of tokenised assets.
a. One such collaboration is already underway. Les Gardiennes, an initiative jointly led by Banque de France and MAS, has been exploring the use of Repurchase Agreements involving tokenised financial assets and tokenised money, with UBS and Société Générale-FORGE
b. Looking ahead, we envisage scaling these use cases to co-opt a broader range of financial institutions, asset classes and jurisdictions.
19. We are complementing this with frameworks developed by industry players for specific asset classes. Two new industry reports will be released this week –
a. An operational guide for tokenised funds
b. A joint report on aligning digital assets offerings with buy-side requirements, authored by the Investment Management Association of Singapore (IMAS) and the Investment Association (IA) in the United Kingdom, with the support of MAS and the Financial Conduct Authority (FCA).
20. Second, for payments, MAS launched BLOOM (Borderless, Liquid, Open, Online, Multi-currency) last month to support responsible development of tokenised deposits and well-regulated stablecoins for wholesale settlement.
21. BLOOM brings together over 16 global institutions, including major banks, financial institutions and FinTechs, to build frameworks for distributing and clearing different settlement assets; as well as promote standardised compliance mechanisms for consistent cross-border implementations.
a. BLOOM participants will be showcasing their use cases over the next three days, so do keep a lookout.
22. Third, cross-border wholesale connectivity between financial market infrastructures is critical to ensuring that value can move swiftly and securely across jurisdictions.
a. This serves as a foundation upon which multiple financial networks can be established.
b. Later this week, we will be announcing collaborations with some central bank counterparts on facilitating cross-border connectivity and interoperability between settlement solutions.
Sound Infrastructure
23. To enable seamless financial networks across borders, we need sound infrastructures, which are designed to meet robust operational standards while enabling interoperability across different platforms and jurisdictions.
24. Today, Real Time Gross Settlement (RTGS) systems facilitate settlement for high-value interbank and financial markets transactions. To support wholesale settlement of tokenised assets, central banks are exploring different approaches – from bridging DLT infrastructures with RTGS systems, to introducing DLT based ledger operated by central banks.
25. MAS is considering a hybrid approach – providing financial institutions access to wholesale CBDC for efficient settlement, while catering for interoperability between emerging market DLT infrastructures and central bank operated ledgers.
26. Last year, I shared that we were planning to set up a Singapore Dollar (SGD) Test network. The SGD Testnet serves as a shared ledger infrastructure designed to facilitate live trials for settling tokenised financial assets.
a. This infrastructure complements existing market DLT platforms by providing participants with access to common settlement assets across different platforms.
b. Access will be accorded to a select group of market participants, specifically for wholesale settlement activities involving common settlement assets.
c. We will be sharing more details about the operationalisation of the SGD Testnet tomorrow.
27. To ensure developments in market infrastructure keeps pace with innovation, and that market developments don’t run ahead of regulatory expectations, public-private sector collaboration is needed.
28. The Global Layer One (GL1) initiative is one such example of public-private collaboration supported by MAS, together with international policymakers like the Bank of England, Banque de France and European Central Bank, and global financial institutions.
29. GL1 is building an ecosystem of financial infrastructures that are compatible with each other and developing toolkits to foster interoperable networks. For example, GL1’s Programmable Compliance Toolkit provides financial institutions with a common framework and templates for implementing compliance controls that meets jurisdiction-specific regulatory and legal requirements.
30. GL1 will continue to develop additional toolkits to support network interoperability. More details can be found on the GL1 website.
Concluding observations
31. When it comes to technology and innovation, there is a strong tendency for market participants to want to race ahead – to be the first mover, or first to market.
32. Rather than racing ahead in isolation, we should also develop the connective tissue together.
a. As an industry.
b. Between incumbents and new digital asset players.
c. Between key stakeholders in the public and private sectors.
33. Only through coordinated efforts across all levels can we achieve sound and sustainable growth in the digital asset ecosystem in a way that engenders trust.
34. This work is what some people call “plumbing” work. It does not get much attention nor make for good headlines. But important to establish high standards, best practices and sound risk management. This provides enabling conditions for robust competition to take place.
35. Let us work together to build a financial ecosystem as connected and interoperable as the world’s best airports. Not walled gardens. Not proprietary silos. But open runways, where innovation can take flight, and markets can truly connect.
36. Have a great Singapore FinTech Festival week ahead. Thank you.
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[1] The collaboration enables on-chain repo and financing solutions, through testing the use of a tokenised money market fund (uMINT by UBS Asset Management Singapore) as collateral to borrow stablecoins (USD Coinvertible issued by SG-FORGE).
[2] This publication covers legal structures for tokenised funds, considerations around interoperability and settlement, practical use cases, and enablers for scalable implementations.
[3] https://global-layer-one.org
