Nasdaq Working With Singapore ‘Central Bank’ and Stock Exchange on a Settlement System for Tokenized Assets

Siamak Masnavi

On 24 August 2018, the Monetary Authority of Singapore (MAS), which effectively functions as Singapore's central bank, and Singapore Exchange(SGX) announced a collaboration (with Nasdaq as one of the key technology partners) to develop "Delivery versus Payment" (DvP) capabilities for settlement of tokenized assets. The idea is to allow "simultaneous exchange and final settlement of tokenised digital currencies and securities assets, improving operational efficiency and reducing settlement risks." (DvP is "a settlement procedure where securities and monies are simultaneously exchanged to ensure that delivery of securities occurs if and only if the corresponding payment is made.")

The three technology partners for the project are Nasdaq, Deloitte, and Anquan. They will be using open-source developed as part of phase 2 of Project Ubin ("Re-imagining Interbank Real-Time Gross Settlement System Using Distributed Ledger Technologies). The project will examine the potential of using smart contracts for automating DvP settlement processes, and produce a report by November 2018.

Project Ubin started in 2016 with the development of a simple prototype on Ethereum in Phase 1. This first step's use of Distributed Ledger Technology (DLT) revealed several new challenges and obstacles. Phase 2 focused on solving the challenges "around the need for transactional privacy and deterministic finality", and "the ability to perform multilateral netting capabilities in a decentralised manner while preserving transactional privacy." Prototypes were built on Corda, Hyperledger Fabric and Quorum in order to explore the different models made possible by the varied capabilities and features of the three DLT platforms.

Sopnendu Mohanty, Chief FinTech Officer of MAS, said:

“Blockchain technology is radically transforming how financial transactions are performed today, and the ability to transact seamlessly across blockchains will open up a world of new business opportunities. The involvement of three prominent technology partners highlights the commercial interest in making this a reality. We expect to see further growth in this space as FinTechs leverage on the strong pool of talent and expertise in Singapore to develop innovative blockchain applications and benefit from the new opportunities created.”

Ho Kok Yong, Financial Services Industry Leader at Deloitte Southeast Asia had this comment:

“Deloitte is excited to partner SGX and MAS on this initiative and extend our expertise in blockchain technologies in conjunction with our APAC Blockchain Lab to make this visionary project a success. Using two different open source blockchain technologies to implement and design the Distributed Ledger Technologies (DLT) prototype, we are able to mitigate counterparty risks in DvP (Delivery versus Payment) and achieve DvP settlement finality with clearing members. This will also enable transactions to be facilitated in a secure and transparent way, in turn strengthening investors’ experience and confidence.”

And finally, Magnus Haglind, Senior Vice President and Head of Product Management (Market Technology) at Nasdaq stated:

“In our experience of developing projects to leverage blockchain to improve market and operational efficiencies, the willingness to collaborate by cross-industry parties was – and is – the most essential component for success. As we partner to develop technological capabilities to bridge between blockchains from both SGX and MAS, we are excited to join forces in backing and advancing Singapore’s focus on building a Smart Financial Centre ecosystem.”

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