DBS Bank, a Singaporean multinational bank, used DeFi technology to trade state securities and FX. Singapore’s MAS (Monetary Authority of Singapore) backed the initiative, which is part of DBS’s Project Guardian.
Earlier this week, DBS Bank announced that it had started a new initiative. The initiative involves trading government securities and FX (foreign exchange).
The firm also noted that it is using private or permissioned DeFi liquidity pools to test these trades. This initiative is part of the company’s Project Guardian. Project Guardian is a partnership effort backed by the MAS.
The report added that DBS conducted the transactions on a public blockchain. The transaction included the sale and purchase of tokenized SGS (Singapore government securities), the SGD (the Singapore dollar), JPY (the Japanese yen), and Japanese government bonds.
In addition, a DBS spokesperson stated that the bank conducted Project Guardian on the Polygon blockchain. Also, the company used a forked model of Uniswap V2 protocol.
The spokesperson also said two critical operations must take place to achieve an institutional-grade DeFi system. They include price oracles and verifiable credentials.
Meanwhile, this project shows that using a permissioned DeFi protocol allows simultaneous operations. These operations include instant settlement, clearing, trading, and custody.
Also read:According to DBS, this project could transform the current trading processes employed by banks. Also, it would offer more liquidity across several financial markets and assets.
Benefits Of The Project Guardian
Han Kwee Juan, the head of strategy at DBS, said Project Guardian lays the basics for developing international liquidity pools. It also increases trading and transparency and lowers settlement risks. Juan believes smart contracts make it easier to verify and execute trades.
Additionally, Juan noted that a liquid market has massive benefits, such as enticing more investors. Also, it removes the need for intermediaries, thereby increasing efficiency.
The DBS executive added that:
“Presently, government securities and FX are mainly traded in OTC (over-the-counter) markets. These trades involve several intermediaries which cause friction and delays during settlements.”
Meanwhile, DBS Bank is not new to the crypto space. The bank first entered the crypto sector in December 2020. Then, the company launched an institutional crypto exchange. Since then, the firm has taken several steps to grow its cryptocurrency trading platform.
It has launched various crypto-based projects to attract retail investors. The Project Guardian is just another instance of the company’s crypto activities. Various financial institutions are now testing the combination of centralized finance tools with DeFi technology.
Thomas Moser, an official of the Swiss central bank, said that DeFi could coexist with CBDCs (central bank digital currencies). He added that both technologies could complement one another in terms of liquidity and stability.
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