Project Pigeon: Singapore Consortium Tackles Permissionless Blockchain Risk for APAC Banks
A Singapore-anchored consortium has launched Project Pigeon, a working group building governance frameworks so that financial institutions across Asia Pacific can use public, permissionless blockchains without running into punishing capital charges. The initiative brings together banks, crypto-native firms, digital asset exchanges, and law firm Baker McKenzie Wong & Leow. For accounting firms, CFOs, and auditors holding or servicing digital assets in the region, it signals that the regulatory ground beneath permissionless-chain activity is shifting, and that stablecoin accounting and digital asset accounting software decisions made today may need revisiting as the frameworks mature.
What Is Project Pigeon and Who Is Behind It?
Project Pigeon is a governance-framework working group, not a regulator and not a standard-setter. Its output will be industry-developed guidance that financial institutions can reference when building internal policies for permissionless blockchain use. The coalition spans traditional banks, crypto exchanges, and digital asset natives, with Baker McKenzie Wong & Leow providing the legal architecture. The Singapore geography is deliberate: the Monetary Authority of Singapore (MAS) has been one of the most active regulators in the region on digital asset policy, and industry groups here carry real weight in shaping what eventually becomes enforceable rules.
The practical problem the group is trying to solve is straightforward. Under current Basel Committee on Banking Supervision rules, digital securities issued on permissionless blockchains are treated as equivalent to cryptocurrencies such as Bitcoin for risk-weighting purposes. That equivalence triggers the most punitive capital treatment in the Basel III crypto-asset framework, making it economically unviable for most banks to hold or intermediate those instruments, even when the underlying security has the same legal character as a conventional bond or equity.
Why Permissionless Chains Create a Capital Problem
The Basel Committee's existing crypto-asset prudential standard places digital assets into two broad groups. Group 1 assets, which include tokenised traditional assets meeting strict criteria, attract standard credit-risk weights. Group 2 assets, which includes most unbacked crypto and assets that fail the Group 1 conditions, attract a 1,250 percent risk weight, effectively requiring a bank to hold capital equal to the full exposure. A digital security issued on a public chain currently risks falling into Group 2 purely because of the blockchain it sits on, regardless of the legal rights it confers. That is the rule the Basel Committee said in November 2025 it is revisiting, and it is the problem Project Pigeon is trying to bridge in the interim.
Where Regulators Already Stand: Singapore, Hong Kong, and Beyond
Several jurisdictions in the APAC region are not waiting for Basel to publish revised standards before allowing banks to engage with permissionless chains. The source reporting makes clear that some regulators have already said explicitly that institutions can use public chains without capital penalty, provided the digital security receives the same legal treatment as its conventional equivalent.
Hong Kong's Position on Stablecoin Issuance
On stablecoins specifically, Hong Kong has gone further than most. Under the framework developed by the Hong Kong Monetary Authority (HKMA), issuers that have received HKMA approval are permitted to issue on permissionless blockchains. That is a material concession: it means the choice of chain is not itself a disqualifying factor, so long as the issuer has cleared the regulatory gateway. For firms thinking about stablecoin accounting in Hong Kong, this matters because the accounting treatment of a HKMA-approved stablecoin issued on a public chain is governed by the legal and economic substance of the instrument, not by where it lives on-chain.
Singapore's Delayed Guidance
The MAS, meanwhile, delayed its own related guidance this year. The source does not specify which particular consultation or standard was deferred, but the delay is consistent with MAS's pattern of waiting for international consensus, particularly from the Basel Committee and the Financial Stability Board, before finalising domestic rules. That caution creates a gap that Project Pigeon is partly intended to fill: industry-developed governance norms that banks can apply now, ahead of formal regulatory clarity.
The Global Blockchain Business Council Framework
Earlier in 2026, the Global Blockchain Business Council (GBBC) and Oliver Wyman published a framework for public blockchain adoption. That document drew input from DTCC, Euroclear, Ripple, and the World Bank, giving it credibility across both the traditional financial infrastructure and the digital asset worlds. Project Pigeon appears to operate in a complementary space, with the GBBC/Oliver Wyman work providing high-level principles and Project Pigeon focusing on the operational and governance detail that APAC financial institutions need.
Accounting and Financial Reporting Implications
The capital treatment question and the accounting treatment question are related but distinct, and both deserve attention from firms working through their digital asset accounting software requirements.
How Basel Risk Weights Feed Into Financial Statements
For banks that are required to hold 1,250 percent risk-weighted capital against a digital security, the cost of that capital shows up in the pricing of the instrument and, indirectly, in the profitability analysis of any business line touching public-chain assets. If the Basel Committee revises the standard to allow Group 1 treatment for legally equivalent digital securities on permissionless chains, the capital requirement drops sharply, and the economics of holding or intermediating those assets change with it. Finance teams and CFOs should be modelling both scenarios now, because the Basel revision timeline remains uncertain even though the Committee signalled the review in November 2025.
Stablecoin Accounting Under IFRS and Local GAAP
For stablecoins specifically, the accounting question centres on classification. Under IFRS, a stablecoin held by a non-issuer is typically assessed as a financial asset or, where it does not meet the contractual cash flow characteristics test, classified at fair value through profit or loss. The HKMA framework's explicit permission for approved issuers to use permissionless chains does not alter that IFRS analysis for holders, but it does remove one layer of regulatory uncertainty that previously made auditors nervous about the control environment around public-chain instruments. A cleaner regulatory status for the issuer strengthens the going-concern and risk-assessment work that feeds into the audit of any counterparty holding those stablecoins on its balance sheet.
For issuers themselves, stablecoin accounting involves recognising the liability to redeem at par, accounting for the reserve assets (typically government securities or central bank deposits) separately, and disclosing the legal and operational risks of the issuance infrastructure. If that infrastructure now sits on a permissionless chain with explicit HKMA approval, the disclosure narrative changes: it is no longer adequate to describe the chain as an unresolved risk; instead, firms need to explain the governance controls that satisfy the regulator's conditions.
Digital Securities and the Tokenisation Audit Trail
Accounting firms auditing clients who hold tokenised securities on public chains face a specific challenge: the on-chain record is authoritative in a technical sense, but legal title and the ability to enforce rights may depend on off-chain registries or legal agreements. Project Pigeon's governance framework work is likely to address exactly this gap. Until it does, auditors should be documenting how their clients reconcile the on-chain position with any off-chain legal register, and ensuring that the reconciliation is performed at least at each reporting date.
Practical Steps for Accounting Firms and CFOs
The consortium's work is at an early stage. Project Pigeon has launched as a working group; it has not yet published output. But the direction is clear enough for firms to act on now rather than waiting.
Steps to Take Before the Framework Is Published
First, map your current exposure. Identify which client portfolios or balance sheet positions involve digital securities or stablecoins on permissionless blockchains, and document the current capital treatment or accounting classification applied to each. That baseline will be the reference point when either the Basel Committee's revised standard or Project Pigeon's governance framework lands.
Second, engage with the jurisdictional nuance. Hong Kong's HKMA approval pathway for stablecoin issuers on public chains is live now. If any client is or is considering becoming an issuer in Hong Kong, the approval process should be in scope for their regulatory roadmap immediately. Singapore's delayed guidance means the position there is less settled; firms advising Singapore-based clients should flag this explicitly in their risk disclosures and keep a watching brief on MAS announcements.
Third, review your digital asset accounting software stack. The stablecoin accounting and digital asset classification workflows in your current tools need to be capable of capturing the chain-of-issuance metadata, specifically whether an instrument sits on a permissioned or permissionless chain, and linking that to the applicable regulatory treatment. Firms that have not yet built that tagging into their chart of accounts or subsidiary ledger structure should treat it as a near-term priority.
Fourth, revisit audit methodology for public-chain instruments. The on-chain versus off-chain reconciliation issue flagged above should be addressed in engagement-level audit plans now, not deferred until Project Pigeon or the Basel Committee provide final answers.
Frequently Asked Questions
What is the Basel Committee's current rule on digital securities issued on permissionless blockchains?
Under the existing Basel III crypto-asset prudential standard, digital securities on permissionless blockchains are treated in the same risk category as unbacked cryptocurrencies. This attracts a 1,250 percent risk weight, meaning a bank must hold capital equal to the full value of the exposure. The Basel Committee announced in November 2025 that it is reviewing this treatment, but no revised standard has been published.
How does Hong Kong's HKMA framework affect stablecoin accounting?
The HKMA permits approved stablecoin issuers to use permissionless blockchains. For accounting purposes, the approval does not change the IFRS classification of the stablecoin for holders, but it removes a layer of regulatory uncertainty that previously complicated going-concern assessments and risk disclosures. Issuers need to account for reserve assets separately and disclose the governance controls that satisfy the HKMA's conditions for public-chain issuance.
What has the MAS done on permissionless blockchain guidance?
The Monetary Authority of Singapore delayed its related guidance in 2026. The specific consultation deferred was not named in the available reporting. Firms with Singapore exposures should treat the position as unsettled and monitor MAS publications for updates.
Who is involved in Project Pigeon?
The working group includes banks, crypto-native firms, and digital asset exchanges, with law firm Baker McKenzie Wong & Leow providing legal support. It is an industry-led initiative, not a regulatory body, and its output will be governance frameworks rather than enforceable rules.
What should CFOs do now while Project Pigeon's framework is still in development?
CFOs should map existing exposures to public-chain digital securities and stablecoins, document the current capital and accounting treatment, assess which jurisdictions' frameworks apply to each position, and ensure their digital asset accounting software can capture chain-of-issuance metadata at the instrument level. Waiting for the final framework before building that infrastructure is likely to create a compliance backlog when the guidance eventually arrives.
Source: Ledger Insights