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David Lee Kuo Chuen: Blockchain Offers Antidote to ‘Winners-Take-It-All’ Economy

Editor’s note: Blockchain has been an umbrella term for a variety of tech buzzwords: distributed ledger, smart contract, DApps and so on. Despite the hype that’s been building around these neologisms, a lot of substantial questions have to be answered as to how this emerging technology can empower tangible sectors of the economy, and more importantly, benefit people who miss out on an Internet bonanza, which is inclusive — but up to a point.

Many have attempted their answers, but few with the lucidness and coherency as demonstrated by blockchain visionary and investor David Lee Kuo Chuen, who has chronicled the rise of blockchain in seminal works such as Inclusive Fintech: Blockchain, Cryptocurrency and ICO (World Scientific, 2018).

In a recent interview, Professor Lee, who teaches at School of Business, Singapore University of Social Sciences, pierced through technical jargon and shared his perspectives about how to deliver on blockchain’s promise of driving inclusive growth. He also offered his advice for Chinese regulators to combat frauds disguised as serious blockchain entrepreneurship.


There is a lot of activity and buzz around the so-called token economy. Could you explain how it can bring value to mankind?

I think all technologies have a certain element of disruption. But compared to other technologies, AI, big data, AR, VR, drones and so on, I believe that blockchain is a lot more contributive to humality. The reasons are twofold.

Not only does it compensate for inefficiency of the current economy, but it also allows for new business models to be borne out of decentralized technology, which is very different from other technologies that will likely have a negative net effect on employment in the short term as humans are rapidly replaced.

In the case of blockchain and token economy, there is a distribution of trust and wealth function, so this will remedy situations where the pendulum has swung to an extreme, resulting in a concentration of wealth and monopoly power.

In the digital economy, there is a concern about “winners take all,” as it will displace companies and lead to unemployment. Last year, according to a study by Oxfam, close to 82% of the new wealth generated around the world was earned by the richest 1%. This situation will worsen with the new economy and it is not sustainable.

Blockchain has the advantage of not only distributing trust, so that we don’t need a single trusted party, but have multiple-party trust or a near-third-party-trustless system. You can also use blockchain to own a fraction of assets across the border, to tokenize and liquidate “dead” capital and make it “alive.”


What does it mean by bringing a “dead” capital alive?

A good example is lifestock token. A cow is “dead” capital because it cannot be transacted across the border, unless you form a company in a specific jurisdiction to own the cow. But when you tokenize the cow and put it onto blockchain, you may turn a “dead” capital into a “living” capital, a tradable trust-carrier in a cost effective manner.

A farmer who has difficulty obtaining bank loans with his cow as collaterals may get funding through blockchain once the cow becomes a tokenized asset. And that’s one important way in which blockchain can help unbanked populations in Southeast Asia who are left without access to traditional financial services.

This is what I mean by liquidity economy, where we will see a lot of non-fundable assets become fundable. This is in my view the greatest contribution of blockchain, which has not been touched upon so far. Unfortunately, a lot of people associate token with ICO and cryptocurrencies only.

Traditional technologies and business models did improve efficiency, but they failed to address the dilemma of growing the economy and achieving inclusiveness at the same time. Blockchain is able to achieve the twin objectives. Because it’s inclusive, you can include people who are excluded from the financial system into the current one with very low cost. And it allows new business models like the cow token to be created.


The rise of blockchain technology and DApps has posed a challenge to the Internet plus model. How strong will the impact be?

To its credit, the current Internet plus model includes a lot of Fintech features that are very inclusive — but they are centralized. The next era of economic growth will be characterized by decentralized financial inclusion.

If you are a centralized Fintech service provider, you will face a lot of regulatory issues when you try to cross borders. That’s reason number one.

Secondly, very few countries would like to have one Fintech company to control the entire economy, because if anything — a hacking attack, for example — happens to a centralized, inclusive Fintech company that has the monopoly, it will cripple the entire economy.

Therefore, you need to distribute trust and keep many inclusive Fintech programs running at the same time. That will increase the cost of hacking, so that no single hacker can take over a decentralized smart city or decentralized smart finance.

There is a lot of merit in decentralization and the benefits will be realized over time. At the highest level, ours is still a centralized governance system that maintains stability. The only time when it cannot maintain stability is that it in itself doesn’t have a pure intention or motive.


Regulators in China are struggling to keep up with the pace of blockchain innovation and to rein in a sector rife with speculation. To date, is banning ICO effective in curbing speculation?

One fact we know is that perhaps 90% of the ICOs are either scams, or have no reason to be considered as champions of real token economy. A lot of them don’t address issues or take advantage of decentralization. Probably only 10% have a real impact.

But out of this 10%, 9% will fail. So eventually less than 1% of ICOs we are seeing will be successful. With this highly complex environment, it is important that we ensure enough financial stability and literacy.

The problem is, educating people about traditional financial products is difficult enough, talking to them about Fintech is even more so. Technology can do good and can do harm, and when used by people without wisdom, it has the power to destroy.

The only way financial stability can be maintained — or is perceived to be maintained — is to take some drastic measures. In this sense, I think nobody will fault China for doing that (prohibiting ICOs).


Singapore appears to be taking a relatively liberal stance on ICO. Indeed, the country, from its policymakers on down, looks poised to become a pioneer in blockchain entrepreneurship. Can Chinese policymakers learn from their Singaporean counterparts?

Singapore is very different, because ours is a small country, an open economy. In order to deal with the digital economy, Singapore chooses to be as open as possible. We have the sandbox policy to make sure our policies and regulations do not front-run or lag behind innovation. Instead, we synchronize them.

We do have smart regulators, but we are very privileged to not have to worry about internal financial stability caused by ICO or tokenization, at least not now.

We can afford to be a little bit more liberal toward regulation. Again, this is such a small, semi-transparent country, where everybody knows everybody else in the Fintech world, making it difficult for one with malicious intent to do much harm to Singapore.

If there is anything China can take from Singaporean experience, it is the sandbox policy which allows us to experiment with something fairly safely in a controlled environment, without causing much impact on the country’s financial stability.

But regulators can also disrupt themselves. We have also seen that when a regulator is disrupting itself, the idea of a sandbox may become irrelevant!

On the whole, I think China is doing very well. I believe China will be the largest blockchain promoter and market that we’ll see globally, because you have all the talent and resources.




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