Singapore regulators banking on blockchain to transform financial services
BLOCKCHAIN is fundamental for transforming Singapore’s financial services, said the country’s central bank.
The Monetary Authority of Singapore (MAS) is banking on the adoption of technologies including blockchain and artificial intelligence (AI) to strengthen the country’s digital transformation efforts.
Singapore has been operating an environment that encourages blockchain development. This is in contrary to China’s approach, where it recently cracked down on digital currency trading and initial coin offering (ICO) based fundraising.
In a report by the South China Morning Post, Damien Pang, head of technology infrastructure office at the MAS said that the organization aims to regulate the use of blockchain rather than the technology platform itself.
“We aim not to directly regulate a specific technology itself, because technologies are always getting better,” said Pang
Singapore’s blockchain friendly environment has drawn many foreign startups to set up shop on the island state. This includes Chinese startups facing pressure from Beijing, such as Ethereum crypto wallet imToken, bitcoin mining collective Bitmain, and crypto exchange Huobi Group.
Despite crackdowns in China, the government is looking to use blockchain for functions such as records management and cybersecurity. However, it fears that retail investors getting involved with crypto exchanges and ICO schemes can lead to financial instability.
Interesting to note, amid crackdowns, China has seen nearly six times more companies registered with “blockchain” in their names in the first half of 2018, compared to the whole of last year. This translates to about 4,000 so-called “blockchain” companies in existence, according to estimates by the SCMP.
Blockchain was designed to provide greater transparency for any users on the network. The nature of blockchain allows anyone to share and store records of transactions securely and efficiently. This also means anyone on the network can audit the full trail of transaction history at any point in time.
According to ICORating, in Q2 this year there were 57 blockchain projects in Singapore which raised US$574.8 million in total through ICOs. In comparison, Hong Kong only recorded US$47.6 million in investments into 14 projects within the same period.
In Singapore, the MAS categorizes digital assets into three groups – utility tokens (for users to access a company’s product or services), payment tokens (for making payments), and securities (tokens traded for investment).
The regulator is currently not planning on regulating utility tokens, although it is looking to put in place a payment service law for payment tokens by the end of this year. To date, the central bank has not come across any securities tokens, according to Pang.
Beyond regulations, the MAS is also taking an active role in pushing the use of blockchain in the financial industry.
Recently, it has partnered with 11 financial institutions (including the Singaporean stock exchange) and five technology partners for Project Ubin, an initiative to explore the use of blockchain for clearing and settlement of payments and securities.