Arrangement: Spinach Spinach
Preface: Perhaps many people have not noticed that the entire blockchain industry is undergoing an unprecedented transformation driven by the public sector, which will affect the entire financial and monetary system of mankind in the future.
In June 2024, the Monetary Authority of Singapore (MAS) officially released the white paper "Global Layer 1: Foundation Layer for Financial Networks", marking that Singapore will establish an important "central bank blockchain". At the same time, the "currency bridge blockchain mBridge" jointly created by the Bank for International Settlements, the People's Bank of China and the Hong Kong Monetary Authority has also entered the MVP stage and publicly invited international cooperation.
Prior to this, the Bank for International Settlements (BIS) published an article in April 2024 entitled "Financial Internet (Finternet)", which elaborated on the future blueprint and vision of tokenization and unified ledger, and surfaced the central bank's attitude towards this change.
In October 2023, the author published a 30,000-word long research report entitled "The Future Blueprint of RWA Asset Tokenization: A Panoramic Review of the Underlying Logic and the Path to Large-Scale Application Implementation (30,000-word Research Report), which comprehensively discussed the underlying logic of tokenization and its path to large-scale application. Friends who have read it carefully should know that it is not a research report on the RWA track project in the crypto market, but an in-depth discussion of the future development direction from the perspective of actual implementation.
In this article, I personally believe that in the future, the vast majority of real-world assets will be tokenized on permissioned chains with regulatory compliance frameworks, and different regulatory jurisdictions will form a multi-chain interoperability pattern. In this pattern, on-chain fiat currencies such as CBDC and tokenized bank deposits will become the main currencies in use.
From the white paper of the Monetary Authority of Singapore, we can observe that the industry development seems to be moving in the direction predicted by the author. On this basis, the author also shares some of his own views on the future development direction of the industry:
1. Although the scale of RWA is at the trillion level, the RWA track will gradually evolve into a game for those in power and traditional financial institutions, leaving not many opportunities for pure Web3. The core is compliance + assets. Compliance is formulated by those in power, and assets are held by capitalists and financial institutions. Technology is not the moat of this track. Therefore, it seems that entrepreneurs in the RWA track only have two paths to choose from: "full compliance" and "complete non-compliance".
2. In the past, areas such as cross-border payments, international trade, and supply chain finance were considered to be the areas with the most potential for improvement and application of blockchain. There is a great chance that they will be truly implemented in this wave of global public and private sector mobilization. These areas also have market sizes of hundreds of billions or trillions of dollars, but they are also a track that relies on compliance and resources.
3. In the white paper, MAS clearly stated that public chains are not suitable for regulated activities or regulated financial institutions, and there is currently a lack of infrastructure suitable for financial institutions in the market. Therefore, the trillion-dollar assets that many people imagine will be put on the chain in the future may not be the public chain, and according to the author, the concerns of some RWA investors come from some unknown risks, such as security risks, which are almost inevitable in the public chain. There is no accountability system, and you can't do anything if your money is stolen by hackers. Therefore, the author boldly predicts that the public permission chain will have an exponential explosion in the future, and clear legal supervision and accountability system will dispel the concerns of most investors.
4. In the white paper, the Native Token of Global Layer 1 is the central bank digital currency CBDC, and stablecoins are not mentioned. According to the author's observation, for central banks, CBDC and tokenized bank deposits are the first choice, and stablecoins are not given priority due to their structural defects such as the inability to achieve the "singleness" of currency and the risk of depegging. But does this mean that CBDC will replace stablecoins in the future? Not necessarily, but it may present a pattern of "giving God what belongs to God and giving Caesar what belongs to Caesar". This is a very interesting topic, and the author will have the opportunity to talk about this topic in the future.
5.a16z partner Chris Dixon once said in his book "Read Write Own Building the Next Era of the Internet" that there are two different cultures in the industry: "computer" and "casino", which represent different development paths of the industry. "Computer culture" represents developers, entrepreneurs and many visionaries who are able to put encryption in the context of the broader history of the Internet and understand the technical significance of blockchain in the long run. On the other hand, "casino" culture focuses more on short-term gains and profiting from price fluctuations. In my personal opinion, as the industry develops, the dividends of wild growth will gradually disappear, and the "casino" culture will always exist, but there will not be so many opportunities left for ordinary people, and people will pay more and more attention to the "computer" culture, truly promote the development of technology, and create real value.
Many people may have noticed that I update less and less frequently, and the content is rarely related to the market, but focuses on the development trend of the central bank. This is because I am currently following the entrepreneurial team to participate in a series of pilot projects in cooperation with the central bank, and most of my energy is focused on entrepreneurial-related matters. Therefore, in the future, I will continue to update similar content. This may not make you make money directly, but it can help you understand the latest industry development trends from another perspective. I also believe that these contents will attract many like-minded friends. Respect! The following is the text of the white paper:
1 Introduction
The Global Layer 1 (GL1) initiative explores the development of a multi-functional shared ledger infrastructure based on distributed ledger technology (DLT), developed by regulated financial institutions for the financial industry. Our vision is for regulated financial institutions to use this shared ledger infrastructure to deploy intrinsically interoperable digital asset applications across jurisdictions, governed by common asset standards, smart contracts, and digital identity technologies. Creating a shared ledger infrastructure will unlock liquidity that is fragmented across multiple venues and enable financial institutions to collaborate more effectively. Financial institutions can expand the services they offer to their customers while reducing the cost of building their own infrastructure.
GL1’s focus is to provide financial institutions with a shared ledger infrastructure to develop, deploy and use applications applicable to the financial industry value chain, such as issuance, distribution, trading and settlement, custody, asset servicing and payments. This can enhance cross-border payments and cross-border distribution and settlement of capital market instruments. The establishment of a consortium of financial institutions that leverages DLT to address specific use cases such as cross-border payments is not a new development. The transformative potential of GL1’s unique approach lies in the development of a shared ledger infrastructure that can be used for different use cases and is able to support composable transactions involving multiple financial assets and applications, while complying with regulatory requirements.
By leveraging the capabilities of the broader financial ecosystem, financial institutions can provide richer and broader services to end users and get to market faster. GL1's shared ledger infrastructure will enable financial institutions to build and deploy composite applications that leverage the capabilities of other application providers. This can manifest as programmatic modeling and execution of institutional-grade financial protocols for foreign exchange exchange and settlement. This in turn can improve the interaction of tokenized currencies and assets, enabling synchronous delivery-versus-payment (DvP) settlement of digital and other tokenized assets, and payment-versus-payment (PvP) settlement of foreign exchange exchange. Further extension, this can support delivery-versus-payment-versus-payment (DvPvP), that is, the settlement chain can consist of a set of synchronized tokenized currency and asset transfers.
This paper introduces the GL1 initiative and discusses the role of a shared ledger infrastructure that will be compliant with applicable regulations and governed by common technical standards, principles and practices, and that regulated financial institutions can deploy tokenized assets across jurisdictions. The involvement of public and private sector stakeholders is critical to ensuring that the shared ledger infrastructure is built in accordance with relevant regulatory requirements and international standards and meets market needs.
2. Background and Motivation
The legacy infrastructure that underpins global financial markets was developed decades ago, resulting in isolated databases, disparate communication protocols, and high costs associated with maintaining proprietary systems and custom integrations. While global financial markets remain strong and resilient, the demands of the industry have become more complex and large-scale. Merely incremental upgrades to existing financial infrastructure may not be enough to keep pace with complexity and the speed of change.
As a result, financial institutions are turning to technologies such as distributed ledger technology (DLT) because of its potential to modernize market infrastructure and provide a more automated and cost-effective model. Notably, industry players have launched their own digital asset initiatives separately. However, they have chosen different technologies and vendors for their respective initiatives, which limits interoperability.
Limitations in interoperability between systems have led to market fragmentation, with liquidity trapped between venues due to incompatible infrastructure. Holding liquidity in different venues can increase capital and opportunity costs. In addition, the proliferation of different infrastructures and the lack of globally recognized classifications and standards related to digital assets and DLT increase the cost of adoption as financial institutions need to invest in and support different types of technologies.
In order to enable seamless cross-border transactions and fully realize the value of DLT, a compliant infrastructure designed around openness and interoperability is needed. Infrastructure providers should also understand the applicable laws and regulations related to the issuance and transfer of tokenized financial assets, as well as the regulatory treatment of products created under different tokenization structures.
Recent BIS working papers articulating the vision of the “Financial Internet” (Finternet) and the “Unified Ledger” further support tokenization and its role in applications such as cross-border payments and securities settlement. If managed properly, an open and interconnected financial ecosystem can improve access to and efficiency of financial services through better integration of financial processes.
Although experiments and pilots in asset tokenization have made good progress, the lack of financial networks and technical infrastructure suitable for financial institutions to execute digital asset transactions has limited the ability of financial institutions to deploy tokenized assets on a commercial scale. As a result, market participation and secondary trading opportunities for tokenized assets are still low relative to traditional markets.
The following paragraphs discuss two network models commonly used by financial institutions today, as well as a third model that combines the openness of Model 1 with the protections of Model 2.
Model 1: Public permissionless blockchain
Currently, public permissionless blockchains attract a large number of applications and users because they are designed to be open and accessible to all parties. In essence, they are similar to the Internet in that public networks are able to grow at an exponential rate because approval is not required before participating in the network. Therefore, public permissionless blockchains have significant potential network effects. By building on shared and open infrastructure, developers can leverage existing capabilities without having to rebuild similar infrastructure themselves.
Public permissionless networks were not originally designed for regulated activities. They are autonomous and decentralized in nature. There is no legal entity responsible for these networks, no enforceable service-level agreements (SLAs) on performance and resiliency (including network risk mitigation), and a lack of certainty and assurance around transaction processing.
Due to the lack of clear accountability, anonymity of service providers, and the absence of service level agreements, these networks are not suitable for regulated financial institutions without additional safeguards and controls. In addition, the legal considerations and general guidelines regarding the use of such blockchains are unclear. These factors make it difficult for regulated financial institutions to use them.
Model 2: Private Permissioned Blockchain
Some financial institutions have determined that currently available public permissionless blockchains do not meet their needs. As a result, many financial institutions have chosen to build independent private permissioned networks and their ecosystems.
These private permissioned networks contain technical features that enable them to implement rules, procedures, and smart contracts in accordance with applicable legal and regulatory frameworks. They are also designed to ensure the network’s resilience in the face of malicious behavior.
However, the proliferation of private and permissioned networks, if they are not interoperable with each other, could lead to greater fragmentation of wholesale funding market liquidity in the long term. If not addressed, fragmentation will reduce network effects in financial markets and could create frictions for market participants, such as inaccessibility, increased liquidity requirements due to the separation of liquidity pools, and price arbitrage across networks.
Model 3: Public Permissioned Blockchain
Public permissioned networks allow any entity that meets the participation criteria to participate, but the types of activities that participants can conduct on the network are restricted. Public permissioned networks, operated by financial institutions for the financial services industry, can achieve the benefits of open and accessible networks while minimizing risks and concerns.
Such a network would be built on similar principles of openness and accessibility as the public internet, but with built-in safeguards for serving as a value exchange network. For example, the network's governing rules might limit membership to regulated financial institutions. Transactions could be supplemented with privacy-enhancing technologies such as zero-knowledge proofs and homomorphic encryption. While the concept of public and permissioned networks is not new, there is no precedent for such networks being provided at scale by regulated financial institutions.
The GL1 initiative will explore and consider various network models, including the concept of a public permissioned infrastructure in the context of relevant regulatory requirements. For example, regulated financial institutions could operate GL1 nodes, and participants on the GL1 platform would be subject to Know Your Customer (KYC) checks. Subsequent sections will describe how GL1 would operate in practice.
The GL1 initiative aims to facilitate the development of a shared layer infrastructure for hosting tokenized financial assets and financial applications along the financial value chain.
GL1's infrastructure will be asset-type neutral; it will support tokenized assets and tokenized currencies issued by network users (such as regulated financial institutions) in different jurisdictions and in different currency denominations. This can simplify processing, support automatic and instant cross-border fund transfers, and facilitate simultaneous foreign exchange (FX) swaps and securities settlements based on predefined conditions.
The infrastructure will be developed by financial institutions for the financial services industry and will serve as a platform that will provide the following capabilities:
Sync across apps
Composability
privacy protection
Intrinsic application compatibility with assets already tokenized and/or issued on the infrastructure
GL1 operating companies will act as technology suppliers and common infrastructure providers across markets and jurisdictions. To facilitate the development of an ecosystem of solutions, GL1 will also support regulated financial institutions to build, operate and deploy applications on a common digital infrastructure covering:
Transaction lifecycle (primary issuance, trading, settlement, payment, collateral management, corporate actions, etc.)
Issuance and trading of different asset types (e.g., cash, securities, alternative assets)
3.1 Key Objectives
To achieve the vision of creating more efficient clearing and settlement solutions, and unlocking new business models through programmatic and composable features, the GL1 initiative will focus on the following aspects: a) Supporting the creation of multi-functional networks. b) Enabling the deployment of a wide range of applications from payments, capital raising to secondary trading. c) Providing an infrastructure for hosting and executing transactions involving tokenized assets, which are digital representations of value or rights that can be transferred and stored electronically. Tokenized assets can be assets across asset classes (such as stocks, fixed income, fund shares, etc.) or currencies (such as commercial bank money, central bank money). d) Encouraging the development and establishment of internationally recognized common principles, policies and standards to ensure that tokenized assets and applications developed on and for GL1 are interoperable internationally and across networks.
3.2 Design Principles
In order to achieve GL1’s goal of serving the needs of the financial industry, GL1’s underlying digital infrastructure will be developed based on the following set of principles:
Open and Standards-Based: Technical specifications will be public and open, enabling members to easily build and deploy applications. Industry standards and open source protocols (for payment messages and tokens) may be used where appropriate. Where existing standards are undeveloped or inadequate, appropriate efforts will be made to ensure that the design is flexible and that future standards may be proposed or incorporated.
Comply with applicable regulations and be open to regulators: The GL1 Platform will comply with applicable legal and regulatory requirements. Policy controls for specific jurisdictions should be developed at the application layer and not built into the GL1 Platform. Legal and regulatory requirements applicable to members or end-users may depend on an analysis of the business application, services and location of the member or end-user.
Good governance: Appropriate governance, operating arrangements, membership agreements and rules will be clear and transparent to ensure clear lines of responsibility and accountability.
Neutrality: The design should prevent concentration or aggregation of control in any single entity or group of related entities, as well as in geographic areas. Key operating decisions, including technology selection, will be made based on (among other factors) the technical merits and will be evaluated by the members.
Commercial fairness: Financial institutions should be able to compete fairly on the GL1 platform. GL1 operating companies will not make decisions designed to unfairly benefit one financial institution over others.
Functionally and economically accessible: Financial institutions that meet the membership criteria will be eligible to participate. Membership criteria, operating costs and fees will be designed to promote the integrity, stability and sustainability of the network.
Financial Self-sustainability: The GL1 platform can be operated as an industry utility. Revenues, including subscription fees and transaction fees, will be used for operating costs and reinvestment (such as enhancements and technology research and development) to ensure the continued sustainability of GL1.
3.3 Architecture Overview
GL1’s architecture can be described as the base layer of a four-layer conceptual model of a digital asset platform. This four-layer model was first introduced in the Monetary Authority of Singapore’s (MAS) “Project Guardian – Open and Interoperable Networks” and the International Monetary Fund’s (IMF) “ASAP: A Conceptual Model for Digital Asset Platforms” working paper.
Although still under consideration, the expected interaction of GL1 with other component layers can be described as follows:
Access Layer The access layer refers to how end users access the various digital services built around the GL1 platform. Each service provider will be responsible for: a) providing wallet functionality that complies with GL1 standards; b) conducting KYC checks on their respective customers; c) onboarding, authorizing and offboarding their direct customers; d) servicing their own customers. It is assumed that non-designated financial institutions can access GL1's services, but they first need to access through a designated financial institution.
Regulated financial institutions and trusted third parties that meet the participation criteria should be able to build and deploy application services on the GL1 platform, such as interbank transfers and collateral management. Participating financial institutions need to follow the settlement function standards defined by GL1, including: no payment delivery (FoP), payment-to-payment (PvP), delivery-to-payment (DvP) and delivery-to-delivery (DvD). Service providers can also develop their own smart contract logic that is not included in the GL1 default software library.
The asset layer will support the native issuance of cash, securities and other assets, as well as the tokenization of existing physical or analog assets. Supported asset types may include cash and cash equivalents, equities, fixed income, commodities, derivatives, alternative assets, fund units, letters of credit, bills of exchange, asset reference tokens and other tokens. Assets on GL1 will be deployed in the form of tokens and should be designed to be technically interoperable between multiple GL1 applications and service providers.
Platform Layer (Global Layer 1) GL1 will provide infrastructure components for the platform layer, which includes blockchain infrastructure (including ledgers and consensus mechanisms), libraries and templates, data standards, and platform-wide services. The infrastructure for record keeping will be separated from the application layer, ensuring that assets on the GL1 platform are compatible with multiple applications, even if these applications are provided by different institutions. The GL1 platform will include standardized protocols for consensus and synchronization mechanisms to enable asset transfers and cross-application communication. The platform will also ensure privacy, permission management, and data isolation from other applications and participants.
Under GL1, entities that act as validators and ensure the integrity of recorded transactions need to follow technical risk management controls for the financial sector, including business continuity plans and cybersecurity protection procedures. In return for their efforts, validators can be paid upfront through transaction fees or through deferred recurring payments based on subscription fees.
To ensure compatibility with other layers in the stack, the GL1 platform will adhere to a defined set of data and operational standards (assets, tokens, wallets, etc.) and include core functionality, common libraries, and business logic (access, smart contracts, workflows) that can be leveraged as optional “starter kits.”
4. Potential uses of GL1
GL1 will be designed to support multiple use cases and be neutral to asset types. It will support all regulated financial assets, tokenized central bank money, and commercial bank money on a shared ledger infrastructure. Participating central banks can also issue central bank digital currencies (CBDCs) as common settlement assets.
For GL1, any financial institution that meets the minimum applicable standards and passes the due diligence process can participate and use GL1 services without the approval of a central authority. However, only permitted parties can build and deploy commercial applications on the GL1 platform, and must comply with GL1's data and security standards. The permitted activities performed by financial institutions will be proportional to their risk profile and their ability to mitigate the associated risks.
Initial use cases identified include cross-border payments and cross-border distribution and settlement of capital market instruments on digital asset networks. Table 3 provides examples of potential uses for GL1.
The examples included in this article are for illustrative purposes only and should not be considered as official advice applicable to all usage scenarios of the GL1 platform.
GL1 Value Proposition
By bringing digital asset applications and regulated financial institution participants to a shared ledger infrastructure, the financial industry is expected to realize the benefits of digital assets and potentially significantly accelerate the modernization of traditional market infrastructure. Table 4 describes some of the potential value propositions of GL1.
5. Operational Model
In practice, multiple financial applications and networks can be established using the GL1 platform. A financial network is defined here as an alliance of a group of financial institutions that agree to trade using a common set of business arrangements and governance rules that define the responsibilities and obligations of each party to the transaction.
Financial networks can be organized around specific use cases. For example, one financial network might consist of applications focused on cross-border payments. Meanwhile, other financial networks might focus on use cases like cash and securities settlement.
Financial networks can also include different types of tokenized assets. Some financial networks may focus on the use of wholesale central bank digital currencies (CBDCs), while others explore the use of central bank money and commercial bank money on a shared ledger. Financial networks can also span multiple use cases and jurisdictions. For example, the Monetary Authority of Singapore’s (MAS) Guardian Project wholesale network will include applications that support foreign exchange swaps, fixed income, and asset and wealth management tokenized products.
Although each financial network is or will be independently governed and have different characteristics, the potential to expand the reach of a single financial network may be an important motivation for them to choose a common infrastructure. By using the same shared ledger infrastructure, tokenized assets can be transferred between different financial networks, and new applications can be composed by building applications originating from multiple financial networks.
In some cases, financial institutions may not be able to conduct transactions on a network based on a shared ledger infrastructure, but this can be solved by interconnecting financial networks based on different ledger technologies. The advantages and disadvantages of interconnected networks are detailed in the "Guardian Project - Interlinking Networks Technical White Paper" by the Monetary Authority of Singapore (MAS). For further considerations on expanding the network, please refer to the "Guardian Project Open and Interoperable Networks" paper.
As a regulated financial services platform, some activities on the GL1 platform may be restricted and only allowed to be carried out by designated service providers. The relevant operator is expected to define the rulebook and stipulate the types of activities allowed. For example, all participants can initiate transactions, but only designated financial institutions can deploy smart contracts. Additional controls may be defined at the various network and application levels, and access to specific functions may be limited to selected parties that have passed the necessary screening or certification process.
Settlement arrangements The GL1 platform can support financial market infrastructure (FMI) operators in providing clearing and settlement functions for payments, securities and other financial transactions. GL1 operating companies can act as technology infrastructure providers to FMI operators when building the GL1 platform. FMIs can still play a key role in the value chain, but the functions traditionally performed by specific types of FMIs or key service providers (CSPs) may be reorganized.
For example, under existing arrangements, trade execution, clearing and settlement functions are performed by different systems, which are operated by different parties. When a payment is made through a separate system, the ownership of the securities is transferred and the records of the central securities depository (CSD) are updated.
With GL1, this coordination can be automated through smart contracts. Under the new arrangement, both cash and securities trades will be hosted and executed on the same shared ledger infrastructure. This means that cash and securities can be exchanged simultaneously, and either the cash or securities portion of the trade will succeed, or both will fail. This arrangement will minimize the impact on the system in the event of a counterparty default.
Settlement Finality A key requirement of GL1 design is that the platform supports settlement finality, i.e. the ability to clearly define when a settlement becomes irrevocable and unconditional. This is not trivial in a distributed network where multiple validating nodes are simultaneously validating transactions and updating records. Choosing an appropriate algorithm for achieving consensus on the ledger state will be an important design decision in order to ensure consistency between the stages of ledger operations and when a transfer is considered to have settlement finality.
In the case of GL1, it is assumed that a deterministic consensus algorithm is required to support settlement finality. For example, it may be defined by the FMI operator that once a predetermined number of validating nodes operated by a designated financial institution reach consensus on the state of the ledger, the settlement is considered final and irrevocable. For completeness, FMI operators utilizing the GL1 platform should be aware of the relevant regulatory regimes applicable to settlement finality.
Organization and Regulatory Oversight By design, GL1 operating companies may operate in markets and jurisdictions where participating financial institutions operate. Depending on the specific arrangements between the GL1 operating company and the participating financial institutions, and subject to commercial and legal analysis, GL1’s infrastructure and its operating companies may be considered FMIs and/or critical service providers in certain jurisdictions where they operate.
Operating companies and participating financial institutions need to consider and manage potential risk factors. These risks include credit, liquidity and operational risks, the impact of loss or delay in access to the GL1 platform, and taking appropriate measures to mitigate the impact of systemic downtime. Environmental, social and governance risks also need to be considered.
Financial institutions utilizing the GL1 platform may also be subject to different applicable licensing and regulatory requirements depending on their organizational form and settlement arrangements. Further commercial, legal and governance analysis is required to determine the responsibilities and accountability of GL1 operating companies when entering into settlement arrangements with FMI operators in participating jurisdictions.
In this regard, the GL1 operating company will work with relevant stakeholders, including supervisory authorities, to ensure that the rule of law is upheld with respect to GL1 infrastructure.
Future Work The Monetary Authority of Singapore (MAS) and participating financial institutions have been discussing and generating insights and ideas on the GL1 shared ledger infrastructure since its launch in November 2023. Among the topics discussed, participating financial institutions considered the following:
Potential business use cases deployed on the GL1 platform include domestic and cross-border payments, primary issuance of securities and other financial instruments, collateral management and securities settlement.
Alignment of GL1’s governance model requires a separate legal entity to run GL1 in the form of an operating company, and a not-for-profit organization focused on governance principles, standards and best practices.
Provide an initial assessment of the policies, risks and legal considerations for the services provided.
Conduct preliminary assessment and recommendations on the suitability of existing distributed ledger technologies (DLT) for the development of GL1, taking into account potential business needs.
In the next phase, GL1 will take a two-pronged approach to promote its development. GL1 will explore the establishment of a non-profit organization to develop common principles, policies and standards for running GL1. This will complement the independent operating companies that may be established in the future, which will build and deploy GL1 infrastructure.
The development of the governance and operating model may include consideration of factors such as membership type and distribution, target operating model, expected operating costs, proposed fee structure, estimated revenues and cost neutrality for the entity to reach break-even point. It may also extend to the initial evaluation of potential solution options and technical design considerations for achieving GL1.
It is expected that existing distributed ledger technology will be used, with further potential enhancements to support the specific needs of GL1.
Summary GL1 is expected to be a multi-year initiative to build the foundational digital infrastructure that will shape the financial network of the future. When this vision comes to fruition, it could fundamentally change the way asset lifecycles and capital markets operate. Realizing this potential will require unprecedented multi-jurisdictional cooperation, involving both the private and public sectors, not seen since the advent of the Internet.
The power of uniting a global network of banks, public sector authorities and international organizations is clear: the initiative welcomes contributions from the international community to advance GL1 as a foundational digital infrastructure to support the transformation of the financial sector.
Original: https://www.mas.gov.sg/publications/monographs-or-information-paper/2024/gl1-whitepaper
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Glossary
Central Counterparty (CCP): A legal entity that inserts itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer.
Central Securities Depository (CSD): refers to the legal person that operates the securities settlement system (settlement services) and provides the initial recording of securities in the bookkeeping system (notary services) and/or maintains securities accounts at the top level (central maintenance services).
Custody: refers to the safekeeping and management of financial instruments for client accounts, including custodians and related services such as cash/collateral management.
Delivery-vs-Delivery (DvD): A securities settlement mechanism that links two security transfers to ensure that delivery of one security occurs only when the corresponding delivery of the other security occurs.
Delivery versus Payment (DvP): A securities settlement mechanism that links the transfer of securities to the transfer of cash to ensure that delivery of securities occurs only when the corresponding transfer of cash occurs, and vice versa.
Digital asset: refers to any digital representation of value or rights that can be registered, issued, transferred, or electronically stored using DLT.
Distributed Ledger Technology (DLT): refers to the protocols and supporting infrastructure that allow computers in different locations to propose and verify transactions and synchronize updated records across a network.
Financial Market Infrastructure (FMI): refers to a multilateral system between participating institutions, including system operators, used to clear, settle or record payments, securities, derivatives or other financial transactions. Typical examples include: Central Securities Depositories (CSD), Central Counterparties (CCP), Securities Settlement Systems (SSS), Transaction Repositories (TR).
Financial network: refers to a business network consisting of a group of financial institutions that agree to conduct transactions based on a common set of business arrangements and governance rules.
Delivery without Payment (FoP): refers to the transfer of securities without a corresponding transfer of funds.
Global Layer 1 (GL1): refers to initiatives to build a digital infrastructure for tokenized assets.
GL1 Platform: refers to the shared ledger infrastructure provided by the GL1 Operating Company for hosting and executing tokenized financial assets and transactions.
GL1 Operating Company: refers to an industry utility company operated by a group of financial institutions for the financial industry.
Securities Settlement System: Refers to a formal arrangement among multiple participants whose activities include the execution of transfer instructions.
Security tokens: securities issued, recorded, transferred and stored using DLT.
Settlement: refers to the completion of a securities transaction by transferring cash or securities, or both, to satisfy the obligations of both parties to the transaction.
Smart Contract: refers to a computer program deployed on a distributed ledger in which some or all contractual obligations are automatically recorded, replicated or executed.
Payment-vs-Payment (PvP): refers to a settlement mechanism that ensures that final payment transfer in one currency occurs only when final payment transfer in another currency occurs.
Validator: refers to the node on the distributed ledger or blockchain network that is responsible for verifying network transactions.