Today the Monetary Authority of Singapore (MAS) announced Project Guardian, a digital assets pilot using tokenization on public blockchains. The project involves regulated financial institutions acting as ‘trust anchors’ with an initial pilot involving JP Morgan, DBS Bank and Marketnode, the SGX joint venture for bonds.
Tokenized bonds and deposits will be used in a permissioned liquidity pool for DeFi transactions involving borrowing and lending on a public blockchain. This solution is not targeted at retail investors, so it will only be available in the wholesale market.
This is how we’d imagine this might work based on how the likes of the Aave and Compound lending protocols work. (Aave has permissioned pools as well). A bank might hold $100,000 of XYZ tokenized bonds but wants to borrow money temporarily. So it deposits the $100,000 as collateral which is locked in a smart contract, and they can borrow as much as $75,000, but it has to pay interest.
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