Central Bank Blockchain Wave: The Monetary Authority of Singapore Releases Global Layer 1 White Paper

The Monetary Authority of Singapore (MAS) officially released the White Paper "Global Layer 1: The Foundation Layer of Financial Networks", marking Singapore's establishment of an important "Central Bank Blockchain". This is another significant initiative by central banks on the future blueprint of tokenization and unified ledgers, following the publication of the article "Financial Internet (Finternet)" by the Bank for International Settlements (BIS) in April this year.

Introduction

The Global Layer 1(GL1) initiative aims to explore the development of a multifunctional shared ledger infrastructure based on distributed ledger technology (DLT), developed by regulated financial institutions for the financial industry. The vision of GL1 is to enable regulated financial institutions to deploy inherently interoperable digital asset applications across jurisdictions using this infrastructure, managed through universal asset standards, smart contracts, and digital identity technologies.

The focus of GL1 is to provide shared ledger infrastructure for financial institutions to develop and deploy applications suitable for the financial industry's value chain, 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.

Background and Motivation

The traditional infrastructure supporting global financial markets was developed decades ago, leading to isolated databases, different communication protocols, and high maintenance costs. Financial institutions are turning to technologies such as DLT to modernize market infrastructure and provide more automated and cost-effective models.

However, industry participants have launched their respective digital asset programs, choosing different technologies and vendors, which limits interoperability and leads to market fragmentation and liquidity issues. To achieve seamless cross-border transactions and fully leverage the value of DLT, compliant infrastructure designed around openness and interoperability is required.

Overview of GL1 Architecture

The architecture of GL1 can be described as the foundational layer in the four-layer conceptual model of a digital asset platform.

1. Access Layer: How end users access various digital services built around the GL1 platform.

2. Service Layer: Regulated financial institutions and trusted third parties that meet the participation standards can build and deploy application services on the GL1 platform.

3. Asset Layer: Supports local issuance of cash, securities, and other assets, as well as the tokenization of existing physical or simulated assets.

4. Platform Layer ( GL1): Provides infrastructure components, including Blockchain infrastructure, libraries and templates, data standards, and platform-wide services.

Potential Uses of GL1

GL1 is designed to support a variety of use cases and is agnostic to asset types. It will support all regulated financial assets, tokenized Central Bank currencies, and commercial bank currencies. The initially identified use cases include cross-border payments and the cross-border distribution and settlement of capital market instruments on the digital asset network.

The value proposition of GL1 includes:

• Improve efficiency and reduce costs
• Enhance liquidity management
• Improve risk management
• Promote innovation and new product development
• Enhance cross-border interoperability

Operating Model

In practical operations, multiple financial applications and networks can be established using the GL1 platform. Financial networks can be organized around specific use cases, such as cross-border payments, cash, and securities settlement.

The GL1 operating company will act as a technology provider and a public infrastructure provider across markets and jurisdictions. As a regulated financial services platform, some activities on the GL1 platform may be restricted and only allowed for designated service providers.

In terms of settlement arrangements, the GL1 platform can support financial market infrastructure ( FMI ) operators in providing clearing and settlement functions for payments, securities, and other financial transactions. A key design requirement of GL1 is the ability to support settlement finality.

Future Work

Since its establishment in November 2023, MAS and participating financial institutions have been discussing the GL1 shared ledger infrastructure. In the next phase, GL1 will take a dual approach:

1. Explore the establishment of a non-profit organization to formulate common principles, policies, and standards for operating GL1.

2. Establish an independent operating company to build and deploy GL1 infrastructure.

GL1 is expected to be a multi-year initiative aimed at establishing the foundational digital infrastructure capable of shaping the future financial network. To achieve this potential, unprecedented multilateral cooperation across jurisdictions is required, including participation from both the private and public sectors.