Blue skies ahead – piloting a tokenisation take-off

THE Monetary Authority of Singapore (MAS) recently clarified its stance on digital assets and cryptocurrencies. In a speech on Aug 29, MAS managing director Ravi Menon also set out MAS’ strategy to build a digital asset ecosystem. While MAS discourages cryptocurrency speculation, it supports innovation in digital assets such as the tokenisation of financial and real economy assets and the use of distributed ledger technology (DLT) in financial services.

The emphasis on promoting the digital asset ecosystem is timely as industry trends indicate an upsurge in the use of DLT in financial markets. A survey by the International Securities Services Association (ISSA) comprising 148 organisations across the global investment cycle shows that over 30 per cent of the industry is using DLT in live production, a four-fold increase from 2021. By 2023, it is expected that over 50 per cent of current projects will progress from experimentation to commercial usage with market participants looking beyond cryptocurrencies to tokenise securitised assets, bonds and mutual funds.

Such increased levels of DLT adoption could transform capital markets. In particular, the ‘tokenisation of securities’, or the digital representation of financial instruments such as shares, bonds or fund units on distributed ledgers and the development of secondary markets for tokenised assets, would not only facilitate efficient securities trading and transactions but also enhance financial inclusion and unlock economic value. As Menon stated, the innovative combination of tokenisation and DLT offers transformative economic potential.