8btc Interview | Chief Fintech Officer of MAS: Why Singapore is Leading in Blockchain Innovation?
On July 4, the “2020 China-Singapore Blockchain Leaders Summit” will be held online, which is jointly launched by Singapore University of Social Sciences (SUSS), Wanxiang Blockchain Labs and 8btc.
Blockchain development in both China and Singapore will be one of the main focuses of this Summit. As we all know, Singapore has always been at the forefront of blockchain regulation. From the general guidance on the application of securities laws administered by MAS in relation to offers or issues of digital tokens (or commonly referred to as ICOs) in Singapore to the Payment Services Act, which took effect this year, companies dealing with digital currencies are allowed to apply for licenses. Singapore has become the first choice for many blockchain companies to take root.
At the same time, China is also making great efforts to develop blockchain technology. Blockchain has been a national strategy due to President Xi Jinping’s speech, and blockchain industry in various regions is booming. Perhaps the most notable is the PBoC’s digital currency DC/EP, which has been in pilot use in places such as Chengdu and Suzhou for several months.
To this end, “2020 China-Singapore Blockchain Leaders Summit” provides an opportunity for communications between China and Singapore and builds a bridge for cooperation between the two sides. Among the Summit’s guests is an interesting figure: Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore (MAS).
Why is Singapore so popular with blockchain companies? How will CBDC evolve? How will blockchain industry find a way out under the impact of COVID2019? With these questions in mind, we are honored to have an in-depth conversation with Mr. Mohanty.
1. Four elements define Singapore’s innovation edge
What makes Singapore an innovation hub, Mr. Mohanty told us, is not due to specific technology but “four effects”: innovation effect, network effect, ecosystem effect and regulation effect.
Innovation effect refers to a very vibrant innovation network. Singapore has more than 40 innovation labs dedicated to financial services. At the same time, Singapore supports the development of innovative technologies through government policies, incentives and funding schemes. Most notably, the government’s regulatory sandbox, in which more than half the companies are using blockchain to solve various problems. In addition, there is a strong fraternity of private-sector institutions which are constantly innovating in the space of the financial services.
Mr. Mohanty concluded:
“Across the industry, there is one common element: a passion in trying out different and better ways of delivering financial products and services. The early experiments and trials by the financial industry in applying blockchain technology is one good example.”
Singapore has created good network effects through its blockchain experiment project Ubin. Mr. Mohanty believes that the impact of blockchain across multiple ecosystems and jurisdictions is particularly important, and that network effects are an important factor in achieving the mass adoption of such technologies.
It started the Ubin project as early as 2016, focusing on the development of blockchain use cases, especially in cross-border payments and stock exchange settlement. So far, more than 40 domestic and foreign Banks, fintech companies, consulting firms and technology companies have become a part of the project.
In terms of ecosystem effects, an innovation center needs a supportive ecosystem, and it needs different sectors to support a new technology, not just the financial sector. Singapore Infocomm Media Development Authority (IMDA) has launched a cross-sector blockchain project OpenNodes. It is supported by IBM, R3, ConsenSys, Ethereum Foundation, BMW, PWC, and Singapore Stock Exchange (SGX) to explore diverse blockchain applications and promote blockchain adoption.
The last part is regulation effect. Singapore is said to be at the forefront of blockchain regulation, but Mr. Mohanty stressed that this did not mean lax regulation, but a complete and clear system.
“We have strong technology risk management guidelines. We have strong governance around the use of technology in a way which complies to standards. We are committed to build a secure and thoughtful framework for technology which our financial sectors are developing and adopting. Having strong regulations and clarity around these regulations are a great advantage for Singapore to attract blockchain technology companies and developing the sector to be deeper and brighter.”
2. The most practical use of CBDC has been in financial inclusion
This year has seen an outbreak of central bank digital currency (CBDC) research in the world. Countries like Cambodia, Thailand, Lithuania, Sweden, Singapore and China are putting their efforts on CBDC research. Mr. Mohanty said that the factors driving the adoption of CBDC are different and different countries will use it to solve different problems.
The Bakong project in Cambodia, for example, is being used to improve the efficiency of settlement systems; Sweden’s E-Krona project is seeking to cope with a sharp drop in cash use; China’s DC/EP is designed to expand the access of money.
According to Mr. Mohanty, the most practical and pragmatic use of CBDC has been in the area of financial inclusion. It can be used as benefits transfer during a crisis, and CBDC’s “programmable money” features are used to ensure the reliability of the use of funds and prevent digital currency from being abused.
However, he said CBDC was still in its early stages and needed further experimentation and research, particularly in the retail sector. In contrast, CBDC has had a “very rapid and immediate impact” on cross-border payments and settlement, and “can be used to solve some of these complexities in cross border transfers.”
China and Singapore are also discussing a broad range of FinTech developments and Singapore is looking forward to further cooperation in the future.
3. DeFi is an interesting topic
Before joining MAS, Mr. Mohanty worked for Citibank for 12 years. Mr. Mohanty speaks of DeFi from a banker’s point of view, as the recent wave of DeFi threatens to disrupt the traditional banking model.
“DeFi can bring process efficiencies and banks do see it that way too. They are looking to incorporate some of the technology for their own processes as well.”
He praised the use of smart contracts, but also raised the question of whether we could meet all possible failure scenarios and automate them. He argued that the current DeFi still relies on human intervention.
In the long run, however, DeFi is a promising and interesting direction, but also needs to consider policy issues such as cross-border regulation and agreements.
“So, there are other aspects that have to be considered before DeFi becomes a reality.”
4. Digitized or die
This year, COVID2019 has enabled half the world to go online. Mr. Mohanty said people are now moving from pure productivity and supply-chain optimization to resilience and sustainability. To do this, while still maintaining productivity, will require a major digital transformation.
“Even before COVID19, people used to say digitized or die. I think now digitize or die is truly a reality. If you do not digitize, you will die because that is almost non-negotiable.”
Now, many companies are considering how to recover in the post-COVID2019 era. Many of the remaining human interventions and paper processes have trust issues. This is the “last mile” issue, said Mr. Mohanty, and solving it requires blockchain technology so that the digital transformation can really take place. Therefore, COVID2019 actually creates the right environment for blockchain to become the mainstream technology of the future.
5. China’s adoption of blockchain is impressive
Recently, Chinese provinces and cities have frequently issued policies to promote the development of blockchain. A huge market and economy full of opportunities, and Mr. Mohanty believes that China’s impressive adoption of blockchain means that blockchain is going mainstream.
At the same time, he said, it is a good sign that regulators are looking at putting the right risk-management structures. Regulators’ attention combined with innovators’ input is a big help for blockchain development.
In the eyes of regulators, blockchain governance lies in the independence of the network and related rules. A blockchain network can be distributed, but policies and rules should be made by centralized parties.
“The early stage blockchain was all about decentralization, anonymity and all these things. But the space has evolved. To me, we should take the best of the blockchain technology, which is about distribution efficiency and apply the classical and the current thinking of a centralized policy making and governance on the network. And that is the best combination.”
In addition, he suggested that China could consider cooperating with other markets to try to integrate their networks and build interoperable systems to promote broader communications and cooperation.
Finally, Mr. Mohanty talked about his expectations for the Summit:
“I am looking forward to see the progress of blockchain technology from China. I am also waiting to understand how different use cases have evolved. A conference like this brings a lot of bright ideas and bright people together. So, I am looking to a lot of these interactions, conversations, and knowledge sharing.”
Ideas clash, knowledge sharing, and concept education. “2020 China-Singapore Blockchain Leaders Summit” is about to start. Are you ready?