Standard Chartered is launching a trade finance tokenisation pilot as part of a Monetary Authority of Singapore (MAS) initiative that is exploring the economic potential and value-adding use cases of the issuance of tokens linked to assets.
As part of Project Guardian, launched by the Singaporean regulator in May this year, the bank is leading a project to digitise the trade distribution market by transforming trade assets into transferable instruments that are more transparent and accessible to investors.
“Digital assets are here to stay, and we see its potential to play a greater role in supporting the real economy. By transforming trade assets into transferable instruments, we aim to improve [their]accessibility to an asset class which has largely been the domain of banks with participation from a broader range of investors,” says Kai Fehr, Standard Chartered’s global head of trade and working capital. “Not only can we potentially narrow the US$1.7tn global trade finance gap, this also offers investors the option to balance their portfolio with a digital token that has traceable intrinsic value.”
The aim of the pilot is to create an asset tokenisation use case for financial services, as well as reveal potential risk management issues. MAS says it will use the findings to study the regulatory and risk management implications of tokenised asset transactions.
Leveraging tokenisation to bring more liquidity into trade finance is fast becoming a key area of focus for the industry. In July this year, Tradeteq, a technology provider for trade finance asset distribution, started to fractionalise and tokenise pools of repackaged securitised trade finance assets on the XDC blockchain network, using what it called the first-ever fully regulated, trade finance-backed fungible security token.
Standard Chartered has also been utilising tokenisation technology in deep-tier domestic supply chain financing transactions with Linklogis in China. In a deal carried out in 2019, for example, invoices from suppliers to Digital Guangdong were digitalised and recorded onto a blockchain, which then issued tokens representing the underlying account receivable. The suppliers were then able to split and transfer the tokens to their own suppliers, and their suppliers’ suppliers, enabling deep-tier suppliers to access financing at more affordable rates based on the anchor buyer’s credit rating.
The announcement marks the second pilot taking place under Project Guardian. MAS announced the completion of the first industry pilot, which explored potential decentralised finance applications in wholesale funding markets, today.
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