Regulators worldwide must collaborate to manage the risks to financial stability from new technologies such as generative artificial intelligence (AI) and digital currencies, said Singapore’s Deputy Prime Minister Heng Swee Keat.

While financial technology and generative AI hold great promise, they can be exploited to cause widespread disruption, said Heng on Monday (Jun 26) in Zurich, Switzerland.

Generative AI refers to deep-learning models, such as ChatGPT, that can generate high-quality text, images and other content based on the data they were trained on.

“Rapid innovation can also result in rapid derailment if we do not manage its risks well,” he said, speaking to the Point Zero Forum, an annual policy and technology dialogue between central banks, regulators and industry leaders.

The forum is jointly organised by the Swiss State Secretariat for International Finance and Elevandi, a company set up by the Monetary Authority of Singapore (MAS) to foster an open dialogue between the public and private sectors to advance fintech in the digital economy.

“I am glad to see that we have central banks, regulators, entrepreneurs and industry leaders in the room today. By pooling our perspectives and expertise, we can better shape fintech to be a force for good,” said Heng, who is also the Coordinating Minister for Economic Policies.

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Fintech has improved access to banking services and brought greater convenience to consumers. Meanwhile, blockchain-inspired technologies allow peer-to-peer transfers of digital money without intermediaries, he added.

Fintech can also help bridge the funding gap for sustainable investments needed to save the planet, he noted.

Generative AI, as a general purpose technology, will have a pervasive application and is expected to be particularly game-changing for the services industry.

However, there is a need to address threats such as online scams and fraud and the risk of these innovations being exploited by malicious actors to manipulate markets and launder money, Heng said.

He said regulators and industry leaders should focus their attention on fostering the safe and responsible use of AI, anchor their commitment to sustainability and the green transition, as well as build and renew trust for cross border digital finance.

Singapore has already taken some steps to build a safe and responsible AI ecosystem.

In 2018, the MAS co-developed the fairness, ethics, accountability and transparency (Feat) principles with the financial industry to provide guidance on the responsible use of AI by financial institutions.

More recently, the Veritas Consortium, led by the MAS and involving 31 industry players, was formed to translate and operationalise the Feat principles.

MAS announced on Monday that the consortium has released a Veritas Toolkit 2.0 to support financial institutions in integrating the principles into their internal risk governance.

The central bank said that it is the first-of-its-kind responsible AI toolkit developed specifically for the financial industry.

Heng said that the open-source toolkit will empower financial institutions globally to be better prepared for generative AI, and for the fintech sector to lead in responsible AI adoption.

The minister also said that a new initiative, dubbed Project MindForge, will help examine the risks and opportunities of generative AI for the financial sector by bringing the data resources and domain expertise of the banking sector, together with the top AI companies’ state-of-the-art technologies and advanced algorithms.

Under the project, Singapore will take an “action-oriented approach” of use case studies, prototyping and pilots to aid in the learning and translation process, said Heng.

Additionally, MAS, with the support of tech giant Google, will pilot a one-stop AI resource platform for the financial sector to uplift capabilities across the sector.

By adopting a spirit of open-source sharing and creation, Singapore hopes that this platform will enable individuals to tap on available data to demonstrate their skills and solutions, and land a role within the financial sector.

Also, it will help smaller enterprises level up their capabilities and gain confidence to explore new possibilities, while fintechs and financial institutions can showcase their market-ready solutions to clinch business opportunities and funding.

MAS will also widen the testing of asset tokenisation across more financial asset classes through industry pilots led by 11 financial institutions.

Digitalisation of the financial industry will help the Republic anchor its commitment to sustainability and the green transition, Heng said.

He said MAS has signed an agreement with the United Nations Development Programme and Global Legal Entity Identifier Foundation to co-develop a framework – titled Project Savannah – of digital environmental, social and governance (ESG) credentials for micro, small and medium enterprises.

Project Savannah aims to simplify ESG data reporting for such enterprises worldwide and seamlessly generate trusted ESG credentials via a sustainability reporting platform that went live in September 2022.

“By doing so, we can reduce the reporting burden and the cost of verification for enterprises, to catalyse greater adoption of sustainability reporting across the corporate landscape,” he said. THE STRAITS TIMES