Tokenisation allows the assets to be traded securely and seamlessly without the need for intermediaries. There are already interesting applications in Singapore of tokenisation of both financial and real assets. UOB Bank has piloted the issuance of a $ million digital bond on Marketnode’s servicing platform that facilitates a seamless workflow. OCBC Bank has partnered with MetaVerse Green Exchange to develop green financing products using tokenised carbon credits to help companies offset their carbon emissions. MAS itself has launched an initiative – called Project Guardian – to explore the potential of tokenised real economy and financial assets. The first industry pilot, led by DBS Bank, JP Morgan, SBI Group and Marketnode, will explore the institutional trading of tokenised bonds and deposits to improve efficiency and liquidity in wholesale funding markets. ENABLE DIGITAL CURRENCY CONNECTIVITY A digital asset ecosystem needs a medium of exchange to facilitate transactions – three popular candidates are cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs). How does MAS view each of them? MAS regards cryptocurrencies as unsuitable for use as money and as highly hazardous for retail investors. Cryptocurrencies lack the three fundamental qualities of money: medium of exchange, store of value, and unit of account. As I mentioned earlier, cryptocurrencies serve a useful function within a blockchain network – to reward the participants who help to validate and maintain the record of transactions on the distributed ledger. But outside a blockchain network, cryptocurrencies serve no useful function except as a vehicle for speculation.

Ultimately, these incidents highlight that not properly taking sustainability risks into consideration could result in serious risks, both financial and non-financial risks, that are large enough to impact the viability of the financial institutions themselves. In other words, sustainability risks have been underpriced or underestimated in business practices of financial institutions. Ladies and gentlemen, Let me highlight on risks, especially credit risks, that financial institutions could face from different ESG dimensions. 4/7  On-going global warming can seriously impact future outputs, productivity, or the business continuity of borrowers, reducing their capabilities to generate income and repay debt. Persistent social issues like widening social gaps can fuel social distrust and trigger public unrest and demonstrations, resulting in economic losses. Malpractices by borrowers that have negative implications on environment and society may result in potential business failures, especially in today’s society where information can be quickly disseminated through online and social media channels. Meanwhile, poor governance by financial institutions themselves can result in misallocation of funds and concentration of risks. All of these are examples of how different ESG dimensions can heighten credit risks for financial institutions. Moreover, financial institutions may be subject to credit and reputational risks coming from their corporate clients if their clients fail to adapt business models to meet heightened standards and changing environment. Fast changes in consumer preference for sustainable products and increasing public demand for corporates to demonstrate social responsibility can negatively impact businesses should their business practices fail to meet public expectations.