You are here


The time is right to move the fintech sector towards maturity

THIS week, the world's financial technology purveyors, investors, and regulators are assembling in Singapore for the city-state's Blockchain Week. It has been a rough ride this year, with the industry suffering a US$600 billion drop in value and a corresponding loss to investors. There have also been many fraudulent initial coin offerings, spectacular thefts of digital assets, and disappointing rollouts of the underlying blockchain technology.

Such a downturn was to be expected. The signs of "irrational exuberance" were evident - the hype of Bitcoin's value topping US$20,000, everyone promoting an initial coin offering, and senseless investing in any project that had the word "blockchain" in it.

Other developments compounded blockchain's misfortunes - the technology was taking far too long to get to market, achieve scalable results, and prove its worth to a waiting world. Finally, regulators around the world, tasked with protecting consumers from fraudulent investment schemes, have been caught flat-footed in dealing with this technological advance.


Market voices on:

Singapore remains one of the few regulatory havens for crypto currencies. While the People's Republic of China has banned the crypto world outright and the United States has been largely passive in providing regulations, Singapore has provided some policy guidance. Like Estonia, Malta, Taiwan and other nimble actors, Singapore has smartly positioned itself for crypto-friendly regulatory environments with a regulatory sandbox in which to experiment. The Monetary Authority of Singapore has a very practical approach to crypto currency, dividing digital tokens into utility tokens, payment tokens and securities. The city-state has done well to play host to foundations from which tokens can be released to the investing public, sparking off much economic activity and new innovative mechanisms for digital assets.

The future, however, must include more sanctions for fraudsters, scammers and other nogoodniks. And that's where the new Payment Services Bill, now before the Singapore Parliament, fits in. This legislation would strengthen consumer protection, stem terrorist financing, and increase cyber security - all laudable and necessary goals. Such smart regulations are essential to help grow and protect the marketplace.

In other jurisdictions, self-regulating organisations (SROs) - non-governmental entities that have the power to create and enforce industry standards - are gaining traction. In the wake of a US$500 million theft in January, 16 of the largest crypto currency exchanges in Japan banded together to create an SRO.

In the United Kingdom, a group of crypto enthusiasts started CryptoUK, a trade association; in the US, the Winklevoss twins have promoted an SRO - the Virtual Commodity Association - modelled on the National Futures Association, itself an SRO focused on the derivatives industry. Brian Quintenz, Commissioner of the Commodity Futures Trading Commission, has endorsed this initiative.


Another US-based SRO, the Financial Industry Regulatory Association, is a shining example of industry standardisation, having done important work in regulating firms and professionals selling securities in the United States.

If governments cannot provide meaningful rules to regulate the cryptoworld, it is time for the major players in the industry to collaborate on enforceable best practices. The financial technology industry should work to protect investors, punish fraud and insider trading, and ensure that the market is fair and transparent. With Bitcoin down to US$4,000, the time is right for introspection and ripe for innovation. Singapore Blockchain Week is an apt time for the grownups of the industry to help move fintech toward maturity.

  • The writer is Professor of Law at California Western School of Law in San Diego. He is speaking at Blockshow during Singapore Blockchain Week.