MAS and SGX successfully leverage blockchain technology for settlement of tokenised assets
Singapore, 11 November 2018… The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) have successfully developed Delivery versus Payment (DvP)1 capabilities for the settlement of tokenised assets across different blockchain platforms2. This will help simplify post-trade processes and further shorten settlement cycles.
2 The DvP prototypes, developed with technology partners Anquan, Deloitte and Nasdaq, demonstrated that financial institutions and corporate investors are able to carry out the simultaneous exchange and final settlement of tokenised digital currencies and securities assets on different blockchain platforms. The ability to perform these activities simultaneously improves operational efficiency and reduces settlement risks.
3 The collaboration also demonstrated that DvP settlement finality, interledger interoperability and investor protection can be achieved through specific solutions designed and built on blockchain technology. Following its conclusion, MAS and SGX have jointly published an industry report (5.85 MB), which provides a comprehensive view of automating DvP settlement processes with Smart Contracts3. The report also identifies key technology and operational considerations to ensure resilient operations, and defines a market framework that governs post-trade settlement processes such as arbitration.
4 Mr Sopnendu Mohanty, Chief FinTech Officer, MAS, said, “Blockchain technology and asset tokenisation are fuelling a new wave of innovation globally. This project has demonstrated the value of blockchain technology and the benefits it can bring to the financial industry in the short to medium term. The concept of asset tokenisation, 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.”
5 Ms Tinku Gupta, Head of Technology at SGX and Project Chair, said, “We are delighted to drive this important industry effort to accelerate innovation in the marketplace. 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.”
1 Delivery versus Payment (DvP) is a settlement procedure where securities and monies are simultaneously exchanged to ensure that delivery of securities occurs only if the corresponding payment is made. 2 MAS and SGX announced the collaboration in August this year, one of two spin-offs from Project Ubin. 3 Smart Contracts are self-executing contracts where contractual terms or business logics are codified as software code to be executed upon the fulfilment of pre-defined conditions.
Project Ubin started in November 2016 as an industry collaboration to explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities. This is with the aim of understanding DLT’s potential in making financial transactions and processes more transparent, resilient and at lower cost.
The first two phases of Project Ubin focused on domestic inter-bank payment and settlement.
Phase 1 achieved the objectives of producing a digital representation of the Singapore dollar for interbank settlement, testing methods of connecting bank systems to a DLT, and making the MAS Electronic Payment System (MEPS+) interoperate with the DLT for automated collateral management.
Phase 2 successfully developed software prototypes of three different models for decentralised inter-bank payment and settlements with decentralised netting of payments in a manner that preserves transactional privacy. The source-codes and technical documentations are available for public access under Apache License, Version 2.0. Central banks, financial institutions, as well as academic and research institutions are encouraged to tap the open source-codes to facilitate their experiments, research and innovation.