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.
“Blockchain technology and asset tokenization are fuelling a new wave of innovation globally,” said Mr. Sopnendu Mohanty, Chief FinTech Officer, MAS. “The concept of asset tokenization, as well as other learnings gleaned from this project, can potentially be applied to a broad spectrum of the economy, creating a whole new world of opportunities.”
Ms. Tinku Gupta, Head of Technology at SGX and Project Chair, said, “Based on the unique methodology SGX developed to enable real-world interoperability of platforms, as well as the simultaneous exchange of digital tokens and securities, we have applied for our first-ever technology patent.”
The patent aspect could be interesting. Clearmatics has published open source work on its Ion interoperability protocol which has similar aims to the Singapore project. It’s possible that the Singapore project used a different methodology.
This article will be updated with further report details.