Singapore makes blockchain a priority

Rage Review : In November 2014, Singaporean Prime Minister Lee Hsien Loong formally proposed Singapore's "Smart Nation" initiative, calling on people, businesses and the government to unite and use technology to create "better lives, more opportunities, and stronger communities." In order to achieve this goal, the Monetary Authority of Singapore (MAS) actively supports the development of financial technology, formulates investment strategies, and creates a regulatory environment that is conducive to the development of start-ups.

Translation: Flora

Singapore has made blockchain technology a national priority as it aims to become a global fintech leader.

In November 2014, Singapore Prime Minister Lee Hsien Loong formally proposed Singapore's "Smart Nation" initiative, which calls on people, businesses and the government to unite and use technology to create "better lives, more opportunities and stronger communities."

Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said that a “smart nation” requires a “smart financial center.” MAS is Singapore’s central bank and financial regulator. To achieve this goal, MAS actively supports the development of fintech, formulates investment strategies, and creates a regulatory environment that is conducive to the development of startups.

Ravi Menon

Last month, MAS and the Association of Banks of Singapore partnered to organise the largest fintech conference to date. The four-day conference, from November 14 to 18, brought together the world’s top thought leaders, financiers, fintech entrepreneurs and policymakers on the future of financial services.

There were many major announcements at the conference. Among them, IBM announced that it would work with Singaporean fintech startup KYCK! to build a platform that provides a more efficient customer onboarding process for financial institutions. By using blockchain technology, the new system will allow banks to simplify operations and adopt a one-time process, while data is better protected and identity verification is strengthened.

The FinTech Festival is also an opportunity for MAS to further express its commitment to blockchain technology. On November 26, Menon announced that MAS has reached a cooperation intention with the Singapore Exchange, R3 and eight banks.

The collaboration aims to conduct a proof of concept project using blockchain technology to guide interbank payments. MAS said the new system using blockchain technology should ensure transparency, resilience and high cost-effectiveness of financial transactions and processes.

Under the pilot system, banks deposit cash as collateral in exchange for MAS-issued digital currency, which they can then exchange back into cash.

Participating banks can pay each other digital currency directly without first sending payment instructions through MAS. Menon said:

“This is an improvement over the existing large-value payment system controlled by a central institution, with greater resilience and lower costs. The project marks the first step for the central bank MAS to explore digital currency. The next step will include foreign currency transactions, perhaps with the support of other central banks.”

Banks participating in the proof-of-concept project include Credit Suisse, United Overseas Bank and OCBC Bank.

In addition to cross-border payments, blockchain technology can also be applied in many other areas, including contracts or transactions that currently rely on trusted third-party certification.

Through the Financial Sector Technology and Innovation (FSTI) strategy, MAS has allocated S$225 million over five years to support the creation of a vibrant fintech ecosystem.

Menon publicly stated in June 2015 that one of the projects supported by the strategy is a "distributed record-keeping system based on blockchain technology" that aims to prevent the problem of duplicate invoicing in trade finance.

In August, Singapore’s Infocomm Development Authority (IDA) and the Hong Kong and Shanghai Banking Corporation Limited (HSBC), Bank of America and Merrill Lynch jointly launched a trial of a new blockchain model that uses smart contract technology to automatically execute import and export transactions.

MAS helped establish the IBM Blockchain Innovation Center in Singapore in July, and assisted R3 in establishing Asia’s first blockchain-focused center of excellence, R3 Asia Labs, in November.