ISDA and Ant International call for common industry framework for asset tokenisation
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The report is one of the outcomes of the Monetary Authority of Singapore's (MAS) Project Guardian, which is exploring the use of asset tokenisation to enhance liquidity and efficiency fo financial markets.
ISDA and Ant International are members of the industry group and lead the FX workstream to develop FX data specifications, risk management frameworks and FX documentation. Other contributors to the report include BNY, HSBC, OCBC and the Global Financial Markets Association's Global Foreign Exchange Division.
The full report recommends design principles for tokenised bank liabilities to standardise industry practices and enable interoperability. It also outlines key risks and mitigation actions for shared ledger-based payments and outlines a number of use cases in transaction banking.
As part of the project, Ant International has deployed its blockchain-based Whale platform to develop a global treasury management use case for real-time multi-currency clearing and settlement.
Kelvin Li, general manager of platform tech at Ant International, says: 'WSince 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.'
FX-related risks and costs remain a major hurdle in cross-market and cross-currency payments, especially for businesses in the digital economy. On top of limited settlement windows, they also face time zone delays and different settlement assets and platforms. This results in slower settlement and higher fees, with an estimated US$120 billion spent annually on cross-border transaction fees.
In contrast, use cases by the industry group show that tokenised bank liabilities and shared ledgers can result in faster, more secure and efficient cross-border payments. By enabling interoperability between bank solutions, payments can be completed 24/7 with FX settlement conducted in real-time. Payment settlement time is also reduced to minutes or even seconds.
However, the report stresses that a universally-accepted industry framework is needed for industry-wide adoption.
Scott O'Malia, chief executive of ISDA, states: '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.'
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