Singapore bank DBS uses DeFi to trade FX and state securities
DBS Bank, a major financial services group in Asia, is applying decentralized finance (DeFi) for a project backed by Singapore’s central bank.
DBS has started a trading test of foreign exchange (FX) and government securities using permissioned, or private, DeFi liquidity pools, the firm announced on Nov. 2.
The development is part of Project Guardian, a collaborative cross-industry effort pioneered by the Monetary Authority of Singapore (MAS). Conducted on a public blockchain, the trade included the purchase and sale of tokenized Singapore government securities (SGS), the Singapore dollar (SGD), Japanese government bonds and the Japanese yen (JPY).
The project has shown that trading on a private DeFi protocol enables simultaneous operations of instant trading, settlement, clearing and custody. The initiative could potentially transform the existing trading processes by providing better liquidity across multiple financial assets and markets, DBS said.
According to DBS’ head of strategy Han Kwee Juan, the latest Project Guardian developments lay the foundations for building global institutional liquidity pools enabling faster trading, greater transparency, lower settlement risks and other benefits. Han noted that smart contracts show a lot of promise for trading execution and verification, stating:
Han also pointed out that a highly liquid market attracts more investors and adds efficiency by bypassing intermediaries. “Currently, FX and government securities are primarily transacted in the over-the-counter markets involving multiple intermediaries resulting in friction in the settlement process,” he added.
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