ISDA and Ant International have collaborated on a groundbreaking report focusing on the tokenisation of bank liabilities for FX and cross-border payments. This initiative, known as Project Guardian under the Monetary Authority of Singapore, aims to revolutionise transaction banking by introducing shared ledgers and tokenised bank liabilities.
The report, available on MAS’ website, outlines key design principles for tokenised bank liabilities to streamline industry practices and enhance interoperability. It also addresses critical risks and mitigation strategies for shared ledger-based payments, offering real-world use cases that demonstrate the potential for more efficient transaction banking services.
One of the major challenges in cross-border payments, particularly for digital businesses, is the complexity and cost associated with FX-related risks. The current settlement processes often result in delays and higher fees, amounting to billions of dollars annually. However, the use cases presented in the report illustrate how tokenised bank liabilities and shared ledgers can significantly improve the speed, security, and cost-effectiveness of cross-border transactions.
By enabling 24/7 payment completion with real-time FX settlement, businesses can experience faster and more secure transactions, reducing settlement times to minutes or even seconds. This shift towards tokenisation could potentially save the industry billions of dollars by 2030, making cross-border transactions more efficient and cost-effective.
Industry experts, including ISDA and Ant International, believe that establishing a universal framework for tokenisation is crucial for widespread adoption and cost reduction. By integrating shared ledgers and tokenised bank liabilities into existing banking systems, businesses of all sizes can benefit from improved FX rates and faster settlement processes.
Scott O’Malia, the Chief Executive of ISDA, emphasised the transformative potential of tokenisation in enhancing cross-border payments and FX settlements. He highlighted the importance of common standards and industry documentation to support the safe and efficient use of tokenised bank liabilities, underscoring ISDA’s commitment to driving innovation in this space.
Ant International’s General Manager of Platform Tech, Kelvin Li, expressed pride in contributing to industry adoption of tokenisation through Project Guardian. Ant International’s Whale platform has already demonstrated the benefits of tokenised deposits in streamlining payments and treasury activities, paving the way for more competitive FX rates and faster settlement processes.
According to Kenneth Gay, Chief FinTech Officer at MAS, the use of tokenised bank liabilities represents a significant milestone in the evolution of cross-border payments and FX settlements. Leveraging shared ledger infrastructures can facilitate real-time settlement across borders, ultimately enhancing liquidity management in transaction banking and advancing global financial markets’ efficiency.
As the industry continues to explore the applications of shared ledgers and tokenised bank liabilities, the focus remains on developing innovative use cases that cater to the evolving needs of the digital economy. By promoting collaboration and technological advancements, stakeholders aim to create a more seamless and efficient financial ecosystem for businesses worldwide.
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