Singaporean bank DBS is one of the first banks globally to test trading foreign exchange (FX) and government securities using approved DeFi liquidity pools on the public blockchain via Project Guardian.
DBS said in a statement on Wednesday that the trading will consist of outright buying and selling of tokenized government securities of Singapore (SGS), Singapore dollars (SGD), Japanese government bonds and Japanese yen (JPY).
Han Kwee Juan, DBS Group’s Head of Strategy and Planning, said this is a significant first step in laying the foundations for building global institutional liquidity pools that enable increased trading velocity, greater transparency, greater efficiency, reduced settlement risk and economies of scale.
“This test trading has shown that by harnessing the power of blockchain, the standards by which financial institutions currently interact can be transformed and redesigned to achieve greater efficiency and transparency,” he said.
“The ability to program smart contracts will reshape the way execution can be achieved in a highly trusted manner, especially if it takes place in an eligible market where all anonymous wallets are verified by Trust Anchors that ‘ Carry out Know Your Customer’ processes and trading is allowed to take place in this pool,
“This provides the industry with a stepping stone to further opportunities in the trading world,” he added.
According to Han, Project Guardian has shown that trading in an approved defi protocol allows for instant (atomic) trading, settlement, clearing and custody – all at the same time.
“This could transform current trading processes as trading in an allowed defi protocol achieves greater efficiency by reducing friction and minimizing risk,” he said.
He said the success of this test trade also shows the potential for creating deeper secondary liquidity across multiple financial assets and markets.
“A highly liquid market attracts more investors and achieves efficiencies by bypassing intermediaries,
“Currently, foreign exchange and government bonds are mainly traded on the over-the-counter markets, which involve multiple intermediaries, causing friction in the settlement process,” he said.
According to DBS, Singapore is the third largest foreign exchange center in the world. Singapore’s average daily foreign exchange trading volume rose to US$929 billion in April 2022, up 45 percent from April 2019.
As one of the largest regional market players in Asia, DBS continues to grow its Treasury and Markets (T&M) business.
The T&M business has seen outstanding revenue growth in recent years, from SGD 2.2 billion (US$1.56 billion) in 2019 to SGD 3.2 billion (US$2.27 billion) in 2021, which corresponds to an increase of more than 46 percent.
The company’s five-year revenue growth rate (CAGR) (2017-2021) of 13 percent is also said to be almost double the industry average of 6 percent.
DBS’s T&M business has also completed some industry firsts, including a SGD 15 million (US$10.63 million) digital bond offering, paving the way for more security token offerings and a new path for issuers, investors and Merchant banks opened to interact digitally on one seamless platform.
DBS is a leading financial services group in Asia with a presence in 18 markets. Based in Singapore and listed on the stock exchange, the company is represented in the three most important Asian growth axes: Greater China, Southeast Asia and South Asia.
The Bank offers a full range of retail, small and medium-sized enterprise (SME) and corporate banking services.
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