DBS: One of the first banks globally to adopt DeFi protocols to carry out foreign exchange and government securities transactions

Singapore.02 Nov 2022
Singapore, 02 Nov 2022 - DBS today announced that it has taken another step in reimagining the future of financial markets. It is one of the first banks globally to test the trading of FX and government securities using permissioned DeFi liquidity pools on public blockchain through Project Guardian[1].

The trade comprised of the outright purchase and sale of tokenised Singapore Government Securities (SGS), Singapore Dollar (SGD), Japanese Government Bonds and Japanese Yen (JPY).

Han Kwee Juan, Group Head of Strategy and Planning, DBS, said that this is a significant first step towards laying the foundations for building global institutional liquidity pools that allow for increased trading velocity, greater transparency, higher efficiencies, lower settlement risks and economies of scale.

“This test trade has demonstrated that by harnessing the power of blockchain, the standards by which Financial Institutions currently deal with each other can be transformed and reimagined for greater efficiency and transparency. The ability to programme smart contracts will reshape how execution can be achieved in a highly trusted manner, especially if it takes place in a permissioned market where all anonymous wallets are verified by trust anchors performing ‘Know Your Customer’ processes and trading is allowed to take place within that pool. This provides a springboard for the industry to further opportunities in the trading world.”

Han added that Project Guardian showed that trading in a permissioned Defi protocol enables instant (atomic) trading, settlement, clearing and custody – all at the same time. This could transform current trading processes, as trading in a permissioned Defi protocol achieves greater efficiency by reducing friction and minimising risks. The success of this test trade also indicates the potential for creating deeper secondary liquidity across multiple financial assets and markets. “A highly liquid market attracts more investors and achieves efficiency gains by bypassing intermediaries. Currently, FX and government securities are primarily transacted in the Over-the-Counter markets involving multiple intermediaries resulting in friction in the settlement process.”

Singapore is the third largest foreign exchange centre in the world. Singapore’s FX average daily trading volumes rose to USD929 billion in April 2022[2] increasing 45% from April 2019. DBS, one of the largest regional market participants in Asia, continues to grow its Treasury and Markets (T&M) business. The T&M business recorded stellar income growth in recent years, from SGD2.2 billion in 2019 to SGD3.2 billion in 2021, an increase of more than 46 per cent. The business’ five-year revenue CAGR (2017-2021) of 13 per cent is also almost double the industry average of 6 per cent.

DBS’ T&M business has also executed some industry firsts including a SGD 15 million digital bond paving the way for more Security Token Offerings and facilitating a new avenue for issuers, investors and dealer banks to interact digitally on a seamless platform.

Please also refer to a white paper that has also just been published by DBS, Oliver Wyman, Onyx by JP Morgan, SBI Digital Asset Holdings on ‘Institutional DeFi – The Next Generation of Finance?’.

[1] Project Guardian is a collaborative initiative with the financial industry that seeks to explore the economic potential and value-adding use cases of asset tokenisation. It aims to test the feasibility of applications in asset tokenisation and DeFi while managing risks to financial stability and integrity. Read more here.
[2] https://www.mas.gov.sg/news/media-releases/2022/singapore-cements-position-as-third-largest-global-fx-centre


About DBS
DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world.

Recognised for its global leadership, DBS has been named “World’s Best Bank” by Global Finance, “World’s Best Bank” by Euromoney and “Global Bank of the Year” by The Banker. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney and the world’s “Most Innovative in Digital Banking” by The Banker. In addition, DBS has been accorded the “Safest Bank in Asia“ award by Global Finance for 14 consecutive years from 2009 to 2022.

DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers, as it banks the Asian way. Through the DBS Foundation, the bank creates impact beyond banking by supporting social enterprises: businesses with a double bottom-line of profit and social and/or environmental impact. DBS Foundation also gives back to society in various ways, including equipping communities with future-ready skills and building food resilience.

With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. For more information, please visit www.dbs.com.