Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), recently outlined the central bank’s strategy to ensure seamless financial transactions across digital asset networks during the Singapore Fintech Festival.
Menon highlighted two critical features of digital assets that can revolutionize financial transactions: tokenization and the fractionalization of assets. Tokenization allows financial assets to be exchanged without intermediaries, reducing settlement risk and the need for large funding accounts. The fractionalization of assets makes it possible to partially collateralize assets.
To achieve seamless financial transactions across diverse digital asset networks, Menon stressed the importance of interoperability. He acknowledged the proliferation of digital asset networks due to various motivations and regulatory requirements, making consolidation into a single network impractical. Instead, the focus should be on making these networks interoperable.
The central bank’s approach to this challenge involves Project Guardian, where MAS and industry partners tokenize different asset classes to achieve specific outcomes. The International Monetary Fund (IMF) has joined the Project Guardian policymaker group, formed in collaboration with Japan’s Financial Services Agency (FSA), Switzerland’s Financial Market Supervisory Authority (FINMA), and the UK’s Financial Conduct Authority (FCA).
Menon also discussed the concept of digital money, evaluating various contenders for this role. While cryptocurrencies have faced significant price volatility and failed as mediums of exchange or stores of value, Menon identified wholesale central bank digital currencies (CBDCs) and tokenized bank liabilities as potential digital money solutions that can achieve atomic settlement. Additionally, well-regulated stablecoins can play a useful role in the digital money ecosystem. The MAS has granted in-principle approval to three stablecoin issuers under the Payment Services Act: Straitsx SGD Issuance, Straitsx USD Issuance, and Paxos Digital Singapore.