Moody’s sees asset tokenization, digital money transactions gaining traction in Singapore 

Asset tokenization is seen offering substantial benefits to the finance industry

Moody’s Investors Services expects digital finance systems in the Lion City to “advance” thanks to the recent initiatives unveiled by the Monetary Authority of Singapore (MAS) last month. 

In a 10 December note, the credit rating agency lauded MAS’ 16 Nov announcement about its “Orchid Blueprint,” the expansion of digital money trials as well as its plan to pilot the issuance of live central bank digital currency (CBDC) for wholesale settlement. 

“These developments will facilitate the institutional adoption of digital assets, improve market liquidity and increase the efficiency of financial markets, including the credit markets,” Moody’s said. 

It said the recent initiatives have clarified how the city-state will address the three major challenges that hinder digital finance systems from growing at scale: “infrastructure interoperability; the lack of digital cash to support the life cycle of a tokenization or bond issuance; and the lack of regulatory clarity.”

Moody’s said asset tokenization “offers substantial benefits to the finance industry” since it boosts liquidity of an otherwise illiquid asset, while enabling assets to be divided into smaller bite-size pieces. It also facilitates faster settlement and promotes decentralisation, transparency and data integrity.

While MAS continues to embark on initiatives and work with global financial institutions and policymakers to ensure the foundational digital infrastructure is aligned with international standards, Moody’s still warned of the risks new and untested asset tokenisation platforms entail.

The Orchid Blueprint, meanwhile, lays out the tech infrastructure to facilitate safe digital money transactions in the city-state.

Moody’s also pointed out MAS’ live issuance and use of CBDC for wholesale interbank settlement starting next year, noting that the central bank’s approach on the digital money aligns with their “view that CBDCs will become more popular, whereas stablecoin usage may increase modestly, and it is unlikely that unbacked cryptocurrencies will become widely used.”