Launch of Project Pigeon Consortium Asia-Pacific Working Group

The Asia-Pacific financial sector is accelerating efforts to establish common standards for the use of permissionless blockchains within regulatory frameworks.

On the 13th, Elliptic and the Digital Asset Association (DAA) announced that the Project Pigeon Consortium is launching the "Project Pigeon: Asia-Pacific Permissionless Blockchain Governance Working Group."

This regional initiative focuses on promoting safe and compliant innovations within public blockchain networks. The goal is to provide the necessary framework for financial institutions to operate stably in a rapidly changing regulatory environment.

The project name is derived from the term used in the West. The consortium aims to build a trust-based governance system that enables secure communication and value transfer within open decentralized blockchain networks.

The launch of the working group follows the Monetary Authority of Singapore (MAS) releasing a consultation paper in April regarding the soundness of permissionless blockchain cryptocurrencies. Project Pigeon will support banks and financial institutions in assessing and responding to the regulatory issues raised in that consultation paper.

The consortium will develop a framework centered around four key risk axes, each led by a co-sponsoring organization.

Governance Risk will be handled by RFI. This will address issues of node centralization, maintaining governance transparency, and ensuring strict accountability within the decentralized ecosystem.

Technical Risk will be led by DAA. This will involve developing measures to mitigate 51% attacks, protocol vulnerabilities, smart contract exploitation, and extensive infrastructure risks.

Settlement Finality Risk will be managed by Baker McKenzie. This will focus on evaluating consensus mechanisms, reconciling the differences between probabilistic and deterministic finality, and establishing legal certainty for settlements.

Anti-Money Laundering and Counter-Terrorism Financing Risk will be overseen by Elliptic. This will address issues related to pseudonymity, effective sanctions screening, and the use of advanced on-chain analytics. It will also include compliance with travel rules and the management of soundness risks.

The working group will include banks, cryptocurrency firms, cryptocurrency exchanges, and traditional financial institutions operating in the Asia-Pacific region. Given the importance of this initiative, Project Pigeon has also established observer and advisory roles for key regulatory agencies.

Baker McKenzie will serve as the official secretariat of the consortium, overseeing the overall editing, supporting communication with regulatory authorities, and managing the consortium's governance procedures.

The operational structure will include bi-weekly plenary meetings and focused meetings of four workstream subgroups. Quarterly regulatory reviews and monthly reviews by a central operating committee composed of DAA, RFI, Elliptic, and Baker McKenzie will also take place.

The consortium plans to publish an industry guide titled "Pigeon Permissionless Blockchain" as its final deliverable. This guide will reference existing industry standards and regulatory guidelines, presenting a practical risk management lifecycle framework and implementation guidelines for risk and compliance officers.

The publication will include detailed risk classifications, a list of risk events, and prevention, detection, and control measures. Governance mechanisms, control testing methodologies, and issue management and reporting procedures will also be included.

Along with the guide, the consortium will release a separate regulatory briefing document for supervisory authorities in the Asia-Pacific region. The target date for the publication of the industry guide is the first quarter of 2027.

Consortium workstream representatives emphasized the need for an integrated framework.

Chia Hock Lai, Chair of RFI, stated, "Robust governance is the missing link that connects the ideals of decentralization with the realities of institutions," adding, "We are focused on creating transparent accountability mechanisms that meet regulatory expectations without stifling innovation."

Jaggu Phu, Executive Director of DAA and Chair of the Digital Asset Security Subcommittee, remarked, "The foundational technology of public chains is very powerful, but its complexity is evident. We will establish viable controls to protect financial institutions from protocol vulnerabilities and hostile network activities."

Stephanie Magnus, Partner at Baker McKenzie in the Financial Services Regulatory and Fintech sector, noted, "Legal certainty is key to the functioning of financial markets," stating, "As the use of permissionless blockchain networks continues to evolve, there is a growing need for clarity on legal and governance considerations among financial institutions." She explained that "Project Pigeon serves as a platform to review these issues and contribute to the development of practical approaches for the industry."

Jun Lau, Head of Asia-Pacific Policy and Regulatory Affairs at Elliptic, emphasized, "As the adoption of permissionless chains accelerates, compliance approaches to financial crime must also evolve," stating, "We will embed advanced on-chain analytics and travel rule compliance directly into the operational lifecycle to ensure transparency and security work in tandem."

Interested financial institutions, technology providers, and regulatory agencies can participate in the working group or contribute to the public consultation phase. To express interest or provide expertise and receive official updates, they can contact the Project Pigeon secretariat.