Singapore banks are rapidly expanding their presence in the asset tokenisation space, with DBS launching tokenised structured notes on the Ethereum public blockchain in August. This move is part of a broader trend, as other banks, including OCBC and UOB, explore the potential of digital assets to enhance the liquidity and efficiency of financial markets. Tokenisation, which involves converting assets into digital form for trading on the blockchain, is expected to revolutionize the way assets are bought and sold.
Despite the excitement surrounding digital assets, banks are cautious about the regulatory and talent hurdles that must be overcome. Anti-money laundering compliance is a major concern, with cryptocurrencies having been linked to money laundering in the past. To address this, banks are calling for a common framework for knowing your customers (KYC) that would allow them to interact with other financial institutions and wallets. This would require the development of new talent with expertise in both finance and technology, as well as legal and risk management.
The Monetary Authority of Singapore (MAS) is also watching the space closely, with Alan Lim, head of fintech infrastructure and the AI office, emphasizing the importance of collaboration between regulators and the industry. Project Guardian, a joint initiative between policymakers and the financial industry, aims to enhance liquidity and efficiency in financial markets through asset tokenisation. The project brings together different elements to create a framework for asset tokenisation and interaction.
Overall, while there are significant hurdles to overcome, the potential benefits of asset tokenisation are substantial. As Dr. Steven Hu, head of digital assets for global markets at OCBC, noted, “Tokenisation is no longer a niche area of finance. It is actually becoming the mainstream of financial services at this point of time.” With the right talent, regulatory framework, and collaboration, Singapore’s banks are poised to lead the way in this exciting new field. As Yip Kah Kit, head of blockchain and digital assets at UOB Group, said, “I think there are also other classes of tokenised money – bank deposits being one – that are closely related to both the internal operations and also integrate very well with the core systems of banks in general.”