DBS Bank, a major Asian financial institution, has used decentralized finance (DeFi), technology to trade foreign currency and state securities.
FX Trading on Private DeFi Pools
DBS Bank, Singapore’s largest financial services company, is using DeFi technology to support a project that was backed by the central bank of the region. The project includes a trading testing of foreign currency (FX) as well as government securities using either private or permissioned DeFi liquidity pools.
The firm announced the news on November 2. It claimed that the development was part of its Project Guardian initiative. This collaborative, cross-industry effort was pioneered in the Monetary Authority of Singapore. It was conducted on the Polygon mainnet leveraging a fork of Uniswap v2 protocol. A spokesperson stated that the protocol would need to be upgraded to institutional-grade by implementing verifiable credentials as well as price oracles.
Problems with Liquidity
The initial trade involved the purchase and selling of tokenized Singapore government securities, the Singapore dollar (SGD), Japanese bonds and the Japanese yen. It was conducted on a public Blockchain. The project introduces the idea that trading can be done on a private DeFi protocol. This allows for instant trading, settlement, clearing, clearing, custody, and other operations. This initiative aims to address liquidity issues in existing trading processes.
Improving transparency and efficiency
Han Kwee Juan, DBS’s Head Strategy, has called these Project Guardian developments the foundations of global institutional liquidity pools. He claims that the initiative will allow for faster trading, improve transparency, lower settlement risks, and enable traders to trade more efficiently. Han spoke out on the topic of improving efficiency and verification.
“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 web3 and crypto expansion has been remarkable, especially the steps taken in 2022. DBS Bank became the first local bank in the Metaverse, a record-breaking deal. To create a metaverse experience, the bank entered into a partnership agreement with The Sandbox, a blockchain gaming platform. The bank added a cryptocurrency trading service to its members, Digibank. This allows select investors to trade Bitcoin (BTC), Bitcoin Cash(BCH), Ripple, XRP, and Ethereum (ETH) among other services.
Disclaimer: This article is intended for informational purposes only. This article is not intended to be used for legal, tax, investment or financial advice.