German central bank joins Singapore’s Project Guardian

Germany’s Deutsche Bundesbank has joined Project Guardian, an initiative led by the Monetary Authority of Singapore (MAS) to explore asset tokenization.

The German central bank announced this move on Nov. 8, highlighting plans to deepen international collaboration in developing interoperable platforms for tokenized and digital funds, while advancing discussions on standardization and interoperability of digital assets.

As part of this collaboration, Deutsche Bundesbank will test a blockchain-based platform to evaluate the potential of tokenized funds, though specific details on the project’s technical implementation remain undisclosed.

This partnership aligns with efforts by both institutions to improve liquidity and efficiency in regulated financial markets.

According to MAS Deputy Managing Director Leong Sing Chiong Bundesbank’s expertise would support Project Guardian’s goals, adding that it aims to “enhance liquidity” and “efficiency” of digital asset markets through the initiative.

Meanwhile, Burkhard Balz, an executive board member at the Bundesbank, noted that Germany shares Singapore’s focus on distributed ledger technologies (DLT) and blockchain networks, adding that the bank intends to harness Project Guardian’s resources to assess how asset tokenization might contribute to “meaningful” use cases in the financial industry.

Deutsche Bundesbank previously tested a DLT-powered settlement interface in June in a joint venture with Deutsche Börse and Germany’s Finance Agency. The initiative aimed to explore the integration of DLT into traditional financial systems.

Participation from major financial institutions 

Deutsche Bundesbank becomes the second German-based entity to onboard Project Guardian this year following Deutsche Bank, which signed on earlier in May to investigate asset tokenization.

Deutsche Bank’s team is collaborating with DeFi protocol Memento Blockchain and Interop Labs, a Web3 platform developer, to further its exploration of tokenized assets.

Both Deutsche Bundesbank and Deutsche Bank join an international roster of financial institutions like Citigroup, UBS, DBS, J.P. Morgan, and Franklin Templeton in the Project Guardian initiative. 

Project Guardian, launched in 2022, seeks to apply blockchain technology to financial services, focusing on asset tokenization and smart contracts with the involvement of financial institutions, policymakers, and industry associations across various jurisdictions.

Earlier this month, Singapore laid out its plans to drive the commercialization of tokenized assets, focusing on building market infrastructure, expanding liquidity, and implementing frameworks to support cross-border transactions.

MAS noted that it has witnessed an uptick in demand in areas like fixed income, foreign exchange, and asset management.

At the time, the MAS reported that Project Guardian had completed over 15 industry trials across multiple currencies and financial products, with a particular emphasis on capital markets.

Subsequently, the MAS formed the Guardian Wholesale Network to commercialize these efforts.

Other developments in Singapore

With its forward-thinking approach, Singapore has earned a reputation as a web3 hub by implementing a balanced regulatory approach that encourages innovation while managing potential risks. 

While the MAS has issued warnings about the risks of crypto investments and tightened regulations for digital payment token services, it has also granted licenses to several crypto firms, promoting a regulated environment for crypto activities.

As a result of one such approval granted to Paxos, Singapore introduced its first fully regulated stablecoin, USDG, on Nov. 1.

The stablecoin has launched on the Ethereum blockchain with DBS Bank providing custodial services for the reserve assets which include dollar deposits, short-duration US government securities and cash equivalents.

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