The Central Bank Blockchain is leading a silent revolution

Recently, the Monetary Authority of Singapore (MAS) published a white paper titled "Global Layer One: The Infrastructure Layer of Financial Networks", marking Singapore's establishment of an important "Central Bank Blockchain". At the same time, the "mBridge" monetary bridge blockchain, jointly developed by the Bank for International Settlements, the People's Bank of China, and the Hong Kong Monetary Authority, has also entered the MVP stage and is publicly inviting international cooperation.

These trends indicate that the entire Blockchain industry is迎来 a transformation driven by the public sector, which will impact the future landscape of the entire financial and monetary system for humanity. In fact, the Bank for International Settlements published an article titled "Financial Internet ( Finternet )" back in April of this year, outlining the future blueprint for tokenization and unified ledgers, indicating the Central Bank's stance on this transformation.

The MAS white paper indicates that the industry seems to be heading in this direction. In the future, the vast majority of real-world assets may be tokenized on compliant permissioned blockchains, forming a multi-chain interoperability pattern across different regulatory jurisdictions. In this pattern, legal tender on the chain, such as Central Bank Digital Currency (CBDC) and tokenized bank deposits, will become the main currencies in use.

In this regard, I have the following points of view:

1. The RWA track will gradually evolve into a game for power players and traditional financial institutions, leaving few opportunities for pure Web3. The core is compliance + assets, and technology is not the moat.

2. Cross-border payments, international trade, supply chain finance, and other areas are expected to see real implementation in this wave of global public-private sector mobilization.

3. Public permissioned blockchains may experience exponential growth in the future. Clear legal regulations and accountability mechanisms will alleviate most investors' concerns.

4. CBDC and tokenized bank deposits may be the Central Bank's preferred choice, rather than stablecoins. However, in the future, there may be a pattern of "Render unto Caesar what is Caesar's, and unto God what is God's."

5. The industry will increasingly focus on "computer" culture, promoting technological development and creating real value, rather than "casino" culture.

In summary, this blockchain transformation led by the public sector is quietly advancing and will profoundly impact the future financial landscape. We need to closely monitor relevant trends and grasp the industry development direction.

Interpretation of the Monetary Authority of Singapore's "Global Layer 1 - The Underlying Layer of Financial Networks" White Paper

1. Introduction

The Global Layer ( GL1) initiative aims to explore the development of multifunctional shared ledger infrastructure based on Distributed Ledger Technology ( DLT ), developed by regulated financial institutions for the financial industry. The goal is to enable regulated financial institutions to deploy inherently interoperable digital asset applications across jurisdictions using this shared ledger infrastructure. Creating a shared ledger infrastructure will unlock decentralized liquidity, allowing financial institutions to collaborate more effectively.

The focus of GL1 is to provide a shared ledger infrastructure for financial institutions to develop, deploy, and use applications suitable for the value chain of the financial industry, such as issuance, distribution, trading and settlement, custody, asset services, and payments. This can enhance cross-border payments as well as the cross-border distribution and settlement of capital market instruments.

The uniqueness of GL1 lies in developing a shared ledger infrastructure that can be used for various use cases and supports composable transactions involving multiple financial assets and applications, while complying with regulatory requirements.

2. Background and Motivation

Traditional financial infrastructure has issues such as isolated databases, different communication protocols, and high maintenance costs. Financial institutions are turning to technologies like DLT to modernize market infrastructure. However, different technology and vendor choices limit interoperability, leading to market fragmentation and liquidity challenges.

To achieve seamless cross-border transactions, a compliant infrastructure designed around openness and interoperability is required. The "financial internet" and "unified ledger" visions proposed by the BIS further support the role of tokenization in applications such as cross-border payments and securities settlement.

However, there is currently a lack of financial networks and technological infrastructure suitable for financial institutions to conduct digital asset transactions, which limits the commercial scale deployment of tokenized assets.

3. GL1 Initiative

GL1 aims to promote the development of a shared layer infrastructure for hosting tokenized financial assets and financial applications along the financial value chain. It will support tokenized assets and currencies issued by network users in different jurisdictions.

The basic digital infrastructure of GL1 will be developed according to the following principles:

• Open and standard-based
• Comply with applicable regulations and be open to regulatory authorities
• Good Governance
• Neutrality
• Business Fairness
• Accessibility
• Financial Self-sufficiency

The architecture of GL1 can be described as the foundational layer in the four-layer conceptual model of a digital asset platform, which includes the platform layer, asset layer, service layer, and access layer.

4. Potential Uses of GL1

GL1 will support multiple use cases, including cross-border payments, cross-border distribution and settlement of capital market instruments, etc. Its value proposition includes:

• Improve efficiency and reduce costs
• Enhance liquidity management
• Promote innovation
• Improve risk management
• Increase transparency

5. Operating Model

The GL1 platform can be used to establish multiple financial applications and networks. Financial networks can be organized around specific use cases and can also include different types of tokenized assets.

GL1 Operating Company will serve as a technology provider and public infrastructure provider. In terms of settlement arrangements and settlement finality, GL1 needs to cooperate with relevant regulatory authorities to ensure compliance.

In the future, GL1 will explore the establishment of a non-profit organization to formulate common principles and standards, and may establish an independently operating company to build and deploy infrastructure. This requires unprecedented multilateral cooperation across jurisdictions, including participation from both the private and public sectors.

Overall, GL1 is a long-term initiative aimed at establishing the foundational digital infrastructure that shapes the future financial network. Its implementation could fundamentally change the way asset lifecycles and capital markets operate.