The International Swaps and Derivatives Association (ISDA) and Ant International have released a new report under the Monetary Authority of Singapore’s (MAS) Project Guardian, outlining principles for implementing tokenized bank liabilities and shared ledgers to enhance cross-border payments and foreign exchange (FX) settlement efficiency.
Project Guardian is a global initiative by MAS, involving policymakers and industry leaders, aimed at improving the liquidity and efficiency of financial markets through asset tokenization. ISDA and Ant International served as co-leads for the FX workstream within the project, focusing on FX data specifications, risk management frameworks, and documentation. Additional contributors to the report include BNY, HSBC, OCBC, and the Global Financial Markets Association’s Global Foreign Exchange Division. The report, available on MAS’s website, leverages the partners’ technology expertise, FX payment experience, and extensive industry partnerships to propose guidelines for utilizing tokenized bank liabilities and shared ledgers in transaction banking services. This includes design principles for tokenized bank liabilities to standardize practices and enable interoperability, identification of key risks and mitigation actions for shared ledger-based payments, and real-world use cases demonstrating shared ledgers and tokenized payments in transaction banking.
As a participant in Project Guardian, Ant International, a Singapore-headquartered digital payment, digitization, and financial technology provider, also utilized its blockchain-based Whale platform. The platform was deployed to develop a global treasury management use case for real-time multi-currency clearing and settlement.
Currently, FX-related risks and costs present significant obstacles in cross-market and cross-currency payments, particularly for businesses operating within the digital economy. These challenges include limited settlement windows, time zone discrepancies, and variations in settlement assets and platforms, leading to slower settlement times and higher fees. Estimates indicate that approximately US$120 billion (S$154.2 billion) is spent annually on cross-border transaction fees.
In contrast, the industry group’s use cases demonstrate that tokenized bank liabilities and shared ledgers can facilitate faster, more secure, and efficient cross-border payments. By fostering interoperability among bank solutions, payments can be completed around the clock, with FX settlement occurring in real time. Payment settlement times can be reduced to minutes or even seconds, offering a more streamlined experience for businesses and their customers.
However, widespread industry adoption necessitates a universally accepted framework. Such a framework could potentially reduce cross-border transaction costs by 12.5%, yielding savings of over US$50 billion (S$64.2 billion) for businesses by 2030. ISDA and Ant International, in collaboration with the Project Guardian industry group, plan to continue expanding the applications of shared ledgers and tokenized bank liabilities. This involves developing additional use cases for the digital economy, integrating with existing banking systems, and supporting other digital assets to ensure broad accessibility for businesses of all sizes.
Scott O’Malia, Chief Executive of ISDA, commented, “Tokenisation has the potential to revolutionise cross-border payments and FX settlements, significantly increasing efficiencies and reducing costs and risks. Our work with MAS and the industry group has highlighted the critical importance of common standards and industry documentation to support the safe and efficient use of tokenised bank liabilities, and this will continue to be a focus for ISDA as we further develop the potential for tokenisation.”
Kelvin Li, General Manager of Platform Tech at Ant International, stated, “We are honoured to help shape industry adoption of tokenisation with ISDA under Project Guardian’s leadership. Since 2019, Ant International has used tokenised deposits to streamline wholesale payments and treasury activities. We now process over a third of our transactions on-chain. In addition to faster, cheaper and more secure cross-border payments, tokenisation programmes are translating technology into more competitive FX rates and faster FX settlement for customers. We will continue evolving our Whale platform to serve businesses of all sizes with the latest shared ledger technology, such as tokenised deposits and stablecoins.”
Kenneth Gay, Chief FinTech Officer at MAS, added, “The use of tokenised bank liabilities marks a milestone in the evolution of cross-border payments and FX settlements. Underpinned by shared ledger infrastructures, tokenised bank liabilities can enable 24/7, real-time settlement across borders and help optimise liquidity management in transaction banking. Together with members of Project Guardian, we look forward to advancing efforts towards more efficient global financial markets.”
ISDA, established in 1985, focuses on making global derivatives markets safer and more efficient, boasting over 1,000 member institutions from 76 countries. Ant International, with its headquarters in Singapore and operations across various regions, is a leading global provider of digital payment, digitization, and financial technology services.
