S&P Global Ratings announced it is joining Singapore’s Project Guardian which explores tokenization, mainly on public blockchain. The initiative includes 18 financial institutions and regulators, including the Monetary Authority of Singapore (MAS), the UK’s FCA, Switzerland’s FINMA and Japan’s FSA. The stated goal of MAS is to free up liquidity, create investment opportunities and improve the efficiency of financial markets.
The three Guardian themes are FX, fixed income and asset management. S&P Global will participate in the fixed income workstream. It aims to develop “analytic frameworks, assessments and benchmarks” for digital assets. It was one of the first to take on a DeFi client in 2022, providing a rating for Compound Prime, an affiliate of Compound Labs. Late last year it published stablecoin ratings.
“Recent innovations in digital bonds and tokenized treasuries have highlighted the potential of digitalization to transform capital markets. We aim to bring our risk perspective and insights to this forum to support robust risk mitigation as this technology is applied in financial markets,” said Andrew O’Neill, Digital Assets Analytical Lead, S&P Global Ratings.
At least eight of the participants are running trials linked to fixed income, including Citi, DBS, JP Morgan, SBI, SGX, Standard Chartered, T Rowe Price and UBS.
Given that many believe the future of finance is tokenization, there’s a low-key battle amongst rating agencies to build the experience and clients. Plus, there are a bunch of challenger startups.
To date Moody’s has landed quite a few ratings for digital bonds and other assets issued by the traditional finance sector. For example, they rated some of the bonds issued on the SIX Digital Exchange (SDX). S&P Global Ratings has provided ratings for the Siemens digital bond and the very large KfW digital bond. Project Guardian is a logical way for S&P to gain an advantage.
