SINGAPORE wants to be a crypto assets hub, but not one that centres on the trading and speculating of cryptocurrencies, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said on Thursday (Nov 3).
There is much more to the digital asset ecosystem than cryptocurrencies, said Menon, who was delivering a keynote speech on the second day of the Singapore Fintech Festival.
The real value in the crypto industry comes not from speculating in cryptocurrencies, he stressed, but from tokenising assets and placing them on a distributed ledger for use cases that increase economic efficiency or enhance social inclusion.
"The question is often asked, 'Does Singapore want to be a crypto asset hub?'
"If a crypto hub is about experimenting with programmable money… If it is about applying digital assets for use cases, like atomic supplements… If it is about tokenising real, international assets to increase efficiencies and reduce risk in financial transactions, yes, we want to be a crypto hub. But if it is about trading and speculating in cryptocurrencies for its own sake, that is not the kind of crypto hub we want to be," he said.
One use case of tokenised assets Menon cited was in achieving atomic settlement of transactions.
MAS is now launching a global initiative involving cross-border exchange and settlement of foreign currency transactions using wholesale central bank digital currencies (CBDCs).
The project will study business models and governance structures where settlement can be done atomically, develop standards to support the atomic settlement of currency transactions across platforms, and establish policy guidance for the development of digital currency infrastructure across borders.
Dubbed Ubin+, this is an extension of Project Ubin, the authority's blockchain-based multi-currency payments network launched in 2016.
MAS is also working with the French and Swiss central banks, as well as the Bank of International Settlements' Innovation Hub, to explore the exchange and settlement of wholesale CBDCs with an automated market maker, Menon said.
Automated market makers use algorithms to automate trading with liquidity pools, in place of a traditional market of buyers and sellers.
MAS is also working with financial messaging system Swift to explore different interoperability models, to enable instant cross-border payment and settlement across digital ledger-based systems and existing payment infrastructure.
Menon acknowledged the "harsh winter" that has dawned on the digital assets industry of late, but said it marks an "overdue cleansing of unsustainable business models, highly risky practices and unviable use cases".
Apart from tokenised assets and atomic settlement, he listed three more outcomes that MAS wants to achieve through collaborative fintech projects: instant remittance, programmable money and trusted sustainability data.
Acquiring data involving corporate environment, social and governance (ESG) practices is often manual and costly. Access to good data sources is often fragmented, and data verification is still at a nascent stage, Menon said.
"Green fintech" can help create an ecosystem, he said. MAS aims to launch a digital marketplace in 2023 to facilitate access to ESG data between corporates, investors, solutions providers and financial institutions.
On programmable money, the authority announced early this week that it will conduct trials on the use of purpose-bound money. These include embedding rules in the use of digital government and corporate vouchers, government payouts to those without bank accounts, as well as dispersing grants to training providers without the need for manual verification. MAS plans to sharpen its capabilities and increase accessibility of programmable money to broader segments of the population, Menon said.
On remittance, Menon said MAS is finalising links between national funds transfer service PayNow with India's Unified Payment Interface and Malaysia's DuitNow. Last year, it completed the linkage with Thailand's PromptPay. On a broader scale, MAS is also involved in Project Nexus, which looks at connecting various national payment systems into a cross-border platform.
In his speech, Menon pointed out that fintech investments in Singapore hit a high of US$3.9 billion, up from US$0.9 billion in 2019. Figures from a report by UOB, PwC Singapore and the Singapore Fintech Association show that Singapore-based fintech firms secured 55 per cent of 163 deals in the Asean region in the first nine months of 2022. This amounted to US$1.8 billion in funding, 43 per cent of total funding in the region.