MAS and SGX Develop Blockchain Agnostic Prototypes to Shorten Settlement Cycles

The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) have integrated blockchain technology and smart contracts to significantly shorten settlement periods. Along with the technology of Nasdaq, Deloitte, and Anquan, the new interoperable prototypes will bring benefits to finance that have yet to be seen.

How MAS and SGX Have Shortened Settlement Periods for Tokenized Assets

MAS has teamed up with SGX to bring a never-before-seen innovation to finance. Using distributed ledger technology and smart contract management, MAS and SGX have developed Delivery versus Payment (DvP) capabilities to shorten the settlement of tokenized assets.

In the traditional financial realm, whenever an owner trades a security to another entity, the trade undergoes a 1-2 business day settlement period. Precisely what happens during this period is dependent upon the type of security traded and the applicable regulatory bodies. Generally, the settlement period allows for the buyer to provide payment and the seller to deliver the purchased asset.

Now however, the DvP prototypes allow for the simultaneous trade and final settlement of tokenized assets through smart contracts. The new ability will improve overall efficiency by drastically reducing settlement times.

It was also determined that DvP settlement can occur between various blockchains. Following the findings, MAS and SGX have published a joint report with key details concerning the automated settlement processes through the use of smart contracts.

Various executives provided comments on the project’s latest accomplishment. MAS Chief Fintech Officer Sopnendu Mohanty discussed the impact of blockchain technology on finance:

“Blockchain technology and asset tokenization are fueling a new wave of innovation globally. This project has demonstrated the value of blockchain technology and the benefits it can bring to the financial industry in the short to medium term. The concept of asset tokenization, as well as other learnings gleaned from this project, can potentially be applied to a broad spectrum of the economy, creating a whole new world of opportunities.”

According to SGX Technology Head Tinku Gupta, the project’s success has resulted in SGX’s first ever application for a technology patent:

“We are delighted to drive this important industry effort to accelerate innovation in the marketplace. Based on the unique methodology SGX developed to enable real-world interoperability of platforms, as well as the simultaneous exchange of digital tokens and securities, we have applied for our first-ever technology patent.”

The Development of Interoperability in Blockchain Technology

As the financial sector continues to implement blockchain technology, interoperability has become increasingly popular. Last month, Securrency launched the world’s first interoperable token standards: the CAT-20 and CAT-721. Both can work with Ethereum, Stellar, Ripple, GoChain, EoS, and many others.

Magnus Haglind, Senior VP and Head of Product Management for Nasdaq, discussed the importance of interoperability in the new DvP capabilities:

“In collaborating with SGX and MAS on this unique ecosystem of converging Blockchains, we have demonstrated how to create interoperability between multiple networks to secure settlement between different assets – this is a major step in the application of blockchain to the capital markets.”

Trading and settlement periods are just one aspect of finance witnessing the benefits of blockchain technology. Securities tokenization is also experiencing implementation. Security tokens offer significant benefits— as outlined in our security token guide— for both businesses and investors. Due to the unclear regulatory guidelines concerning the traditional ICO, some blockchain-based startups have cancelled ICOs and turned to Security Token Offerings (STOs) as a functional replacement.

What is undoubtedly clear here, is that finance and blockchain have a number of integrations in progress.

What do you think of the new DvP developments by MAS and SGX? Which aspect of traditional finance will blockchain technology strike next? We’d love to know what you think in the comments below.

Image courtesy of the Monetary Authority of Singapore.