Welcome to the weekly Crypto Market Insights that touch on the latest news on digital assets developments and policy updates from across the Asia Pacific region.

Here are key events from last week:

  • BIS announced Projects Mariana and Mandala with Asian central banks
  • UBS launched its first tokenized VCC fund pilot in Singapore
  • HKEX builds a smart contract based settlement platform on Stock Connect

BIS announced Projects Mariana and Mandala with Asian central banks

The Bank of International Settlements (BIS) announced two separate initiatives, Project Mariana and Project Mandala.

Project Mariana was developed jointly by three BIS Innovation Hub centers together with Banque de France, Monetary Authority of Singapore (MAS), and Swiss National Bank. The project successfully conducted a proof of concept, testing cross-border trading and settlement of wholesale CBDCs (wCBDCs) in hypothetical Euros, Singapore dollars, and Swiss francs. The project relied on three key elements: a common technical token standard provided by a public blockchain, bridges for seamless transfer of wCBDCs across networks, and an Automated Market Maker
MKR
 (AMM) for automated spot FX transactions. The AMM, a specific type of decentralized exchange, utilized innovative algorithms to pool liquidity from the different wCBDCs, enabling automatic pricing, execution, and immediate settlement of spot FX transactions.

This architecture addresses the needs of central banks for oversight and autonomy, while facilitating efficient cross-border holding, transfer, and settlement of wCBDCs for financial institutions. The use of a common token standard on a public blockchain promotes interoperability and seamless exchange of wCBDCs across various local payment and settlement systems maintained by participating central banks. A fascinating use case combining centrally managed assets with decentralized finance (DeFi).

Project Mandala was spearheaded by BIS Innovation Hub Singapore Centre with the Reserve Bank of Australia (RBA), Bank of Korea (BOK), Bank Negara Malaysia (BNM), and MAS, as well as supported by simulated financial institutions, to examine the potential of embedding jurisdiction-specific policy and regulatory requirements into a common protocol, simplifying cross-border use cases like foreign direct investment, borrowing, and payments. One of the primary barriers to fluid cross-border payments is the inconsistency in policy and regulatory frameworks across jurisdictions, leading to extended transaction times, heightened regulatory compliance responsibilities, and stakeholder uncertainty. The project aims to mitigate these challenges by automating compliance processes, enabling real-time transaction scrutiny, and offering enhanced clarity on country-specific regulations.

UBS launched its first tokenized VCC fund pilot in Singapore

In collaboration with traditional financial institutions and Fintech providers to improve market liquidity and access for clients, UBS Asset Management has introduced a tokenized investment fund on the Ethereum
ETH
 public blockchain. The fund, known as a Variable Capital Company (VCC), was launched as part of Singapore’s Project Guardian pilot, which aims to bring real-world assets onto blockchains. The VCC fund is structured as a smart contract on Ethereum and utilizes the firm’s in-house tokenization service called UBS Tokenized. This allows UBS Asset Management to handle various functions such as processing fund subscriptions and redemptions.

The initiative marks a significant milestone in UBS’s exploration of fund tokenization, building upon their expertise in tokenizing bonds and structured products. In November 2022, UBS launched the world’s first digital bond that is publicly traded, followed by the firm issuing a USD 50 million tokenized fixed rate note in December 2022. Earlier this summer in June 2023 UBS also originated CNH 200 million of fully digital structured notes in collaboration with Bank of China International.

HKEX builds a smart contract based settlement platform on Stock Connect

Hong Kong Exchanges and Clearing Limited (HKEX) has launched Synapse, a settlement acceleration platform on top of the Stock Connect system which enables Hong Kong based investors to access stocks in mainland China. Synapse aims to enhance market efficiency and transparency for Northbound Stock Connect participants by automating and streamlining post-trade operations. The platform utilizes the latest technology, including DAML smart contracts, to standardize and streamline post-trade workflows, reducing settlement risks and improving operational efficiencies.

Synapse is part of HKEX’s ongoing commitment to building a marketplace of the future. It is a significant development in the Stock Connect program, which facilitates mutual market access between Mainland Chinese markets and Hong Kong, allowing international investors to better manage their post-trade operations across different time zones. It will be linked with The Depository Trust & Clearing Corporation (DTCC) through its Institutional Trade Processing (ITP) service.

That’s all for the week ending October 6th. Stay tuned for next week’s Crypto Market Insights!

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