Today the Monetary Authority of Singapore (MAS) announced a significant expansion of itsProject Guardian, which explorestokenizationusing public blockchain. The most significant aspect is a new initiative called Global Layer One (GL1). Its designed as an open, digital infrastructure enabling cross border transactions and global liquidity pools. BNY Mellon, JP Morgan, DBS and MUFG are involved.

Before exploring GL1, MAS announced five more use cases. They include aJP Morgan and Apolloinitiative on tokenized funds. AndCiti, Fidelity and T Rowe Priceusing FX and oracles for trades on Avalanche. We covered both of those today.

Putting the Global Layer One in context, there are three other major initiatives along similar lines. They are theRegulated Liability Network(RLN), the BIS concept of aUnified Ledgerand theIMFs XC conceptfor cross border payments. And by the way, the IMF is joining Project Guardian to provide policy input.

While the announcement is thin on details, we believe a key feature of GL1 is the open part. Wed speculate that this might be a quasi public blockchain, probably using proof of authority. Any end user can access the network provided they do KYC. Thats quite different from the RLN, which is more about creating interoperability between disparatewholesalenetworks and ledgers. We believe the Unified Ledger is alsowholesalefocused.

To fully realise the potential of tokenised markets, and achieve network effects, a scalable digital infrastructure is needed, said Mr Leong Sing Chiong, Deputy Managing Director (Markets and Development), MAS. GL1 will provide a foundational digital backbone and bring markets together with similar principles of openness and accessibility as the public internet. MAS welcomes additional policymakers and financial institutions to participate in the design phase of the GL1 initiative and contribute towards its development.

If thats not enough to convince you, heres the rationale behind the public blockchain thesis. Firstly Layer 1 is typically a phrase used in public blockchain circles. A key differentiator of MASsProject Guardianhas been allowing institutions to test the use of public blockchains. Its all done in a regulated way with KYC and layers of permissioning. One enterprise recently said to Ledger Insights that MAS is anti public blockchain. Based on Project Guardian, we disagree. However, its statements position it as not-so-keen on cryptocurrency.

Its possible to have a public blockchain without cryptocurrency. But that requires strong and trusted governance. Regulated institutions might operate all the nodes. Credit Agricole and SEB are doing something similar withSo|bond.

In related news, today MAS published a paper on blockchain interoperability. Most of the document explores aninterlinked network model(INM) which requires bridges. The concern is that bridges are notoriously vulnerable and are currently the source of most hacks on public blockchains.

Before diving into INM, MAS explores the other options. One is a common infrastructure, which MAS previously trialed inProject Dunbarfor cross border CBDC. Another is a layered model along the lines of Ethereum and its sidechains. The paper notes that this ensures that costs remain viable.

Apart from the JP Morgan and Citi projects, another new tokenization initiative is a treasury management solution from Ant Group.HSBC recently partnered Antto trial something similar in Hong Kong. BNY Mellon and OCBC are trialing a cross border FX solution across networks using different technologies. Bear in mind that BNY Mellon custodies reserves for the USDC stablecoin.

U.S. asset managerFranklin Templetonis the fifth use case addition. It already manages the largest tokenized traditional asset fund(more than $300m)on a public blockchain. Now its trialling Singapores new Variable Capital Company (VCC) combined with fund tokenization.

In fact, MAS has started a new VCC track for Project Guardian because eight institutions are engaged in VCC fund tokenization projects. We previously reported onUBS trialing tokenized fundsusing a VCC structure in addition toSchroders.

See the rest here:

Singapore's MAS to explore "global layer 1" blockchain tokenization with BNY, DBS, JPM, MUFG - Ledger Insights - Ledger Insights