DBS Turns To DeFi

Major Asian financial institution DBS Bank has applied decentralized finance (DeFi) technology to trade foreign exchange and state securities. 

FX Trading On Private DeFi Pools

Singapore’s leading financial services group, DBS Bank, is applying DeFi technology for a project backed by the region’s central bank. The project includes a trading test of foreign exchange (FX) and government securities using permissioned or private DeFi liquidity pools. 

On November 2, the firm revealed the news, claiming that the development is a part of its Project Guardian initiative, which is a collaborative, cross-industry effort pioneered by the Monetary Authority of Singapore (MAS) and was conducted on the Polygon mainnet leveraging a fork of the Uniswap v2 protocol. According to a spokesperson, the protocol would need to upgrade to institutional-grade by implementing verifiable credentials and price oracles. 

Addressing Liquidity Issues

The initial trade was conducted on a public blockchain and involved the purchase and sale of tokenized Singapore government securities (SGS), the Singapore dollar (SGD), Japanese government bonds, and the Japanese yen (JPY). The project introduces the idea of trading on a private DeFi protocol to access operations like instant trading, settlement, clearing, and custody – all simultaneously. Existing trading processes struggle with liquidity issues, which this initiative seeks to address across multiple financial assets and markets. 

Improving Transparency, Efficiency

DBS’s Head of Strategy, Han Kwee Juan has called these Project Guardian developments the foundations global institutional liquidity pools. He claims that the initiative will enable quicker trading time, improve transparency, and lower settlement risks. Talking on the subject of improving verification and efficiency, Han said, 

“Smart contracts will reshape how execution can be achieved in a highly trusted manner, especially if it takes place in a permissioned market where all anonymous wallets are verified by trust anchors such as Know Your Customer processes…Currently, FX and government securities are primarily transacted in the over-the-counter markets involving multiple intermediaries resulting in friction in the settlement process.”

DBS And Web3

DBS Bank’s crypto and web3 expansion has been quite noteworthy, especially the steps the company took in 2022. In a record-making deal, DBS became the first local bank to enter the Metaverse. The bank signed a partnership deal with blockchain gaming platform The Sandbox to create a metaverse experience for its customers. Soon after, the financial institution expanded its array of services by introducing a cryptocurrency trading service to its members-only digital exchange, Digibank, where select investors will be able to trade Bitcoin (BTC), Bitcoin Cash (BCH), Ripple (XRP), and Ethereum (ETH). 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.