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The Monetary Authority of Singapore (MAS) has launched Project Guardian, a blockchain-based digital assets trial that will use tokenization. The project will include regulated financial institutions serving as “trust anchors,” with a pilot involving JP Morgan, DBS Bank and Marketnode, the SGX joint venture for bonds.

The Project Guardian initiative, which was announced during the Asia Tech x Singapore Summit on Tuesday, was spearheaded by Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat. It will see MAS explore decentralized finance (DeFi) applications in wholesale funding markets by establishing a liquidity pool of tokenized bonds and deposits to execute borrowing and lending on a public blockchain-based network.

According to MAS chief fintech officer, Dr. Sopnendu Mohanty, lessons from Project Guardian will serve as a basis for informing policy markets on the regulatory guard rails that are required to utilize DeFi while also mitigating its hazards.

Both DBS and JPMorgan have experience developing digital assets and blockchain technology in their wholesale banking operations. Last year, DBS launched an $11 million digital bond in a security token offering (STO). Since its inception in 2020, JPMorgan’s Onyx Digital Assets Network has completed over $300 billion of transactions.

Related: Singapore aims to streamline financial watchdog’s authority over crypto firms

DBS Bank has been active in the cryptocurrency industry for several years, establishing its own institutional-grade crypto exchange in December 2020. The firm has been progressively enhancing the range of supported digital asset services on the exchange, with a crypto trust solution debuting in May 2021.

MAS has taken the lead in exploring the future of finance with DeFi protocols, becoming one of the few major regulators to do so. If it succeeds, it might help Singapore cement its position as a global financial center.