Just three months ago the Singapore Exchange (SGX) and the Monetary Authority of Singapore (MAS)
announced plans for a blockchain settlement system for tokenized assets. This follows the MAS’s significant central bank digital currency (CBDC) tests with Project Ubin. Yesterday both parties
revealed they had developed a solution to enable tokenized digital assets on one ledger (eg. stocks) to be settled with digital money which exists on a separate distributed ledger.
Anquan, Deloitte and Nasdaq also participated in the project and
published a substantial report. Canada’s Project Jasper ran
similar experiments earlier this year and released an explanatory document last month.
Currently in many parts of the world stock settlement takes 2-3 days. As a result, there is counterparty risk. In other words there’s a possibility that one of the parties goes bankrupt during the process or doesn’t pay. This is one of the drivers behind central counterparties who act as clearing houses and also risk buffers. If it’s possible to achieve immediate settlement or finality, referred to as delivery versus payment, then there’s no counterparty risk. In addition to reducing risk it should enhance liquidity.
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