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MAS to debut blockchain-based trade network with HK in 2019

Monetary authority says it is banking on the power of fintech to maintain Singapore's trade-hub status

IMF managing director Christine Lagarde with MAS managing director Ravi Menon during her quick pitstop at the Singapore FinTech Festival 2017 on Tuesday.


SINGAPORE is laying the groundwork to stay on top as a trading hub, with the Monetary Authority of Singapore (MAS) on Tuesday setting an early-2019 deadline for the roll-out of a global trade connectivity network (GTCN) with its Hong Kong counterpart.

This open-architecture platform, which aims to bring about the seamless transfer of digital documents and data across borders, is the result of a fintech agreement inked with the Hong Kong Monetary Authority (HKMA) ahead of the opening of the second Singapore Fintech Festival. It promises to iron out structural problems in the trillion-dollar trade-finance space.

Speaking to participants at the festival, MAS managing director Ravi Menon noted that globally, the financial industry is facing slower economic growth, tighter regulation and keener competition. "It needs to foster innovation and transform itself," he said.

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This means "harnessing technology to increase efficiency, manage risks better, create new opportunities and improve people's lives".

"If Singapore is to maintain its position as one of the top financial centres in the world, it must embrace fintech - maximising its benefits, minimising its risks," he said.

Noting the inefficiencies in trade finance and the heightened risks of fraud due to the paper-based nature of the business, he said that the solution to these problems might lie in blockchain technology.

This uses a distributed ledger - shared among financial institutions and regulators - to digitise trade-finance documents and bring about significant savings for the industry and corporates.

"Blockchain technology offers good promise to make trade finance safer and more efficient," said Mr Menon.

He said that the GTCN will start with the Singapore-Hong Kong trade corridor.

The Business Times understands that MAS is open to exploring similar partnerships with China as well.

Fast forward with Fintech

Meanwhile, Singapore is tidying up the tedium behind trade-finance documents processing, which is done mainly locally.

The National Trade Platform (NTP), unveiled in the 2016 Budget, was meant to replace existing trade systems and help small and medium enterprises (SMEs) trim costs and streamline processes tied to trade.

BT understands that the NTP programme office is gathering proposals for a trade-finance application portal, intended to offer trade-finance options from multiple banks in Singapore; it is also calling for ideas to streamline trade-finance compliance processes.

The goal is to offer a service for companies to easily compare and apply for trade finance and to unify banks' current screening processes for trade financing. Data can also be crowd-sourced to offer better insights on trade flows and to identify pockets of fraud risks.

According to estimates provided during Budget 2016, the NTP is expected to produce more than S$600 million in man-hour savings each year.

BT understands that insurance giant Prudential will soon work with a major telco company to create a blockchain-powered digital marketplace in Singapore, to offer tens of thousands of SMEs with end-to-end services, beginning with matching buyers and sellers to securing alternative trade financing and insurance services. The one-stop portal could make it easy for SMEs to get loans for business expansion and tap bigger opportunities in the Asean market.

Apart from Hong Kong, the MAS is also collaborating with the Bank of Canada to link both their payment systems, which test the use of distributed-ledger technology for cross-border payments.

Mr Menon said blockchain may be able to deal with the banes of cross-border transactions, such as their high cost to customers and slow settlement.