Written by: Aiying

With the rapid development of the digital asset sector, the Monetary Authority of Singapore (MAS) today announced a series of policies to promote the commercialization of asset tokenization. This move not only represents strong support for financial technology innovation, but also provides an important example for the coordinated development of global financial regulation and the Web3 industry. This article interprets MAS's new policies and their impact on the Web3 industry from the perspective of Ai Ying.

1. Global Tokenization Trend and MAS’ Strategic Intentions

Asset tokenization is a means of digitizing real assets using blockchain technology. In recent years, asset tokenization has gradually gained attention worldwide because of its potential to increase asset liquidity, reduce transaction costs and improve transparency. However, lack of regulation and market uncertainty remain the main obstacles to large-scale application. Singapore hopes to become a leading center for global asset tokenization through the policy layout of MAS. This has been fully introduced in Aiying's series on (Real World Assets RWAs).

  • The rise of asset tokenization: Uncovering the exploration of trillion-dollar market opportunities

  • [RWAs] Infrastructure for tokenizing real-world assets

  • [RWAs] Current Status and Case Studies of Government Bond Tokenization

  • [RWAs] Tokenized private credit market and use cases [RWAs] Tokenized commodities and real estate cases

  • [RWAs] Intellectual Property Tokenization Market and Case Studies

  • [RWAs] Luxury Collectibles Tokenization Market and Case Studies

  • [Interpretation of the Bank for International Settlements (BIS) report]: The risks and opportunities of real world assets (RWA) and tokenization

The "Project Guardian" and "Global Layer 1" (GL1) programs launched by MAS aim to provide basic support for the promotion and application of tokenized assets through international cooperation and digital infrastructure construction.

 

MAS’ new policy mainly includes the following four aspects:

1. Build a business network and enhance liquidity

Through the "Guardian Project", MAS has convened more than 40 financial institutions from seven countries to jointly conduct experiments on tokenized assets in the capital market, and has prompted financial institutions such as Citibank and HSBC to form the "Guardian Wholesale Network". This initiative aims to effectively improve the liquidity of tokenized assets in the market, especially in the primary and secondary markets, and bring more opportunities to the financial market. The formation of such a business network will not only help attract more investors to the tokenized asset market, but also bring more efficient trading and price discovery mechanisms through economies of scale. Through this cross-institutional cooperation, the scope of application of tokenized assets is expected to be further expanded, including the tokenized issuance and trading of various financial products such as bonds, funds, and foreign exchange.

2. Digital infrastructure construction to support cross-border transactions

Through the "Global Layer 1" (GL1) plan, MAS builds a basic digital infrastructure for shared ledgers, enabling tokenized assets to flow seamlessly between different countries and markets. GL1's "control principles" and "compliance design" will provide unified regulatory standards for cross-border transactions and enhance market security and transparency. The construction of digital infrastructure is the key to the seamless cross-border flow of tokenized assets, which will not only help solve the current problems of inefficient payment and settlement in the global financial market, but also reduce compliance costs caused by inconsistent regulatory standards in different countries. Through the interconnection of digital infrastructure, Singapore hopes to build a world-leading cross-border tokenized asset trading hub, enabling financial institutions in various countries to participate in the global capital market more conveniently.

3. Establish industry standards

MAS has released two industry frameworks: the Fixed Income Tokenization Framework (GFIF) and the Fund Tokenization Framework (GFF), which provide industry guidelines for the application of tokenized bonds and funds. These frameworks lay the foundation for financial institutions to promote tokenized assets in the debt capital market and fund sectors and standardize market operations. These standards not only provide clear operational guidelines for the widespread application of tokenized assets, but also help reduce uncertainty in the design and issuance of tokenized products. The launch of GFIF and GFF will help build market trust in tokenized assets, especially in the field of fixed income products and funds, which often have high requirements for security and stability. Through these industry standards, MAS attempts to establish a solid foundation for the application of tokenized assets and promote the widespread application of these new financial instruments in traditional markets.

4. Open universal settlement facilities

To improve the reliability of settlement of tokenized assets, MAS plans to facilitate settlement through a wholesale central bank digital currency (CBDC) in Singapore dollars. The test network (SGD Testnet) will first be opened to some major banks for payment and securities settlement, which is expected to improve settlement efficiency while reducing transaction risks. The opening of universal settlement facilities is an important step for tokenized assets to truly enter the mainstream financial market. Through the application of wholesale CBDC, MAS hopes to create an efficient, secure, and low-cost settlement mechanism that can not only significantly reduce settlement risks between financial institutions, but also play an important role in future cross-border transactions. As more banks and financial institutions join, this settlement facility will gradually expand to cover more tokenized asset types and application scenarios.

II. Opportunities and Challenges from a Compliance Perspective

Chance

The release of Singapore's policy this time sends an important signal: MAS is willing to provide an environment for the trial and commercial application of tokenized assets, which provides a valuable opportunity for Web3 companies to enter the traditional financial network. The connection and sharing of tokenized products between financial institutions will help activate market liquidity and provide a good opportunity for the widespread application of Web3 technology. With the policy support of MAS, Web3 companies can experiment and innovate in a highly transparent and regulated environment, which greatly reduces the uncertainty of technology and the market. In addition, the promotion of tokenized assets has also created new business models and revenue sources for Web3 companies, such as the development of tokenized platforms, the application of smart contracts, and the opportunity to provide compliance services.

challenge

However, the compliance requirements are also very strict. From "Global Tier 1" to "Guardian Program", MAS has emphasized risk management, control principles and compliance at every step. This means that Web3 companies must have sound compliance and risk management capabilities to participate in Singapore's tokenization market. In particular, technical and compliance capabilities in KYC (know your customer) and AML (anti-money laundering) must meet higher standards. This poses new challenges to Web3 companies, especially in terms of the balance between compliance and innovation. Companies need to maintain a keen sense of market demand and technological innovation while ensuring that their products and services meet regulatory requirements. In addition, compliance with cross-border transactions is also a major challenge facing Web3 companies. Different regulatory standards in different countries make compliance management of cross-border transactions complicated and time-consuming, which requires companies to find effective solutions in the global compliance framework.

3. Cases and Data Support

In the current tokenization experiment, several global banks have participated, such as Citibank and HSBC. They have achieved some initial results in the application of tokenized bonds and funds. These cases show that the potential of tokenized assets is gradually being tapped, and MAS helps these assets move toward mature applications by building a standardized and secure environment. Experimental results from Citibank and HSBC show that through tokenization, the issuance speed and transaction efficiency of financial products have been significantly improved. At the same time, information transparency in the tokenization process also helps enhance investor trust. These successful application cases not only provide reference experience for other financial institutions, but also accumulate practical data on the operation methods and regulatory compliance of tokenized assets for the entire market.

IV. Ai Ying’s Viewpoint: Compliance Roadmap and Suggestions

Ai Ying believes that it is crucial for Web3 companies that want to enter Singapore's tokenization market to understand and master the policy details of MAS. Compliance is a prerequisite for companies to enter this market. We recommend that companies start with the following aspects:

  • Deeply understand the control principles and industry framework: clarify the control requirements of GL1 and the standards of GFIF and GFF to ensure that the company's internal compliance operations are aligned with them. These standards provide clear guidance for companies to participate in the tokenized asset market. Companies should use this as a benchmark to review and adjust their operating processes and compliance strategies.

  • Establish a sound risk management system: KYC, AML and other risk management measures are necessary, and companies need to prepare in advance to meet the high standards of MAS. A strong risk management system can not only reduce the compliance risks of companies, but also enhance the credibility of companies when cooperating with traditional financial institutions, bringing more opportunities for companies to expand their business.

  • Participate in the cooperative ecosystem and seize the opportunity of CBDC: The test network of the Singapore dollar wholesale CBDC provides participants with new payment and settlement tools. Web3 companies should actively explore application scenarios compatible with it, especially in the fields of payment and securities settlement. By participating in the testing of CBDC, Web3 companies can understand the operating mechanism of the central bank's digital currency and prepare for future digital currency payments and settlements. This will help companies gain a favorable position in the future digital financial system.

Singapore is gradually becoming an innovation center for global asset tokenization. For Web3 companies, compliance is not only a necessary step to enter the mainstream market, but also the key to building market trust and achieving business expansion. In the future, Web3 companies will need to continuously improve their compliance framework while embracing innovation in order to stand out in the fierce market competition. Ai Ying is willing to provide compliance guidance to Web3 companies, help the industry develop in Singapore and even around the world, and jointly welcome the arrival of a new era of financial technology.