The Singapore Fintech Festival’s second day commenced with Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), emphasizing the accelerated innovation and pervasive digitalization transforming the financial services landscape.
Menon remarked that the COVID-19 pandemic and resulting lockdowns prompted a much-needed reevaluation of unsustainable business models and risky practices, suggesting that the digital asset sector is destined to emerge stronger and more efficient as a result.
Over recent years, Singapore has demonstrated remarkable collaboration among various stakeholders, including businesses, financial institutions, fintech startups, and central banks. Investments in fintech have soared to an impressive US$3.9 billion, a significant increase from US$0.9 billion in 2019.
During his address, Menon charted the future of fintech in Singapore and elaborated on five ongoing challenges that require attention. He referenced the Chinese philosophy of Wu Xing, which identifies five elemental forces—Water, Metal, Fire, Wood, and Earth—as drivers of transformation.
Menon articulated five key outcomes sought through collaborative fintech initiatives:
-
Instant Remittance (Water): He highlighted the ongoing endeavors to establish connections like Singapore’s PayNow with Thailand’s PromptPay and intentions to expand to India’s Unified Payments Interface and Malaysia’s DuitNow. The establishment of these connections necessitates alignment on technical standards and adherence to local policies regarding data privacy, security, and capital controls.
MAS, in conjunction with the BIS Innovation Hub, is advancing Project Nexus, a multilateral framework to integrate countries’ real-time payment systems. Each nation needs only to link to a Nexus gateway to connect with all participating countries, creating a streamlined process for payments, foreign exchange conversion, messaging, and compliance.
-
Atomic Settlement (Metal): While Project Nexus addresses clearing issues, it does not resolve the entire settlement problem, which is hampered by multiple intermediaries. Menon emphasized that atomic settlement represents a solution currently under development through Project Ubin, initiated in 2016.
This project has catalyzed collaborations with initiatives like Partior and Project Dunbar. Menon announced that MAS is set to launch Project Ubin+, focusing on the cross-border exchange and settlement of foreign currency transactions with wholesale central bank digital currencies (CBDCs). Collaborations with the French and Swiss central banks are also underway to explore automated market-making for CBDC exchange and settlement.
-
Programmable Money (Fire): Despite digital money constituting 92% of Singapore’s money supply, it remains largely unprogrammable. Menon defined programmable money as a currency that embeds rules defining its use, ensuring compliance even after transfer. For instance, programmable donations ensure funds reach intended recipients and are utilized appropriately, facilitated by tokenization and distributed ledgers.
Menon discussed four pathways for implementing programmable money: while cryptocurrencies face skepticism, stablecoins are viewed as promising, alongside tokenized bank deposits and CBDCs.
-
Tokenized Assets (Wood): Menon conveyed that asset tokenization carries transformative potential akin to past innovations in securitization. While decentralized finance (DeFi) is still evolving, MAS is laying down the groundwork through Project Guardian to maximize tokenized asset benefits while managing associated risks.
He reiterated that the core value of the crypto industry lies not in speculation, but in the practical applications of asset tokenization that enhance economic efficiency and foster social inclusion.
- Trusted Sustainability Data (Earth): Acknowledging the critical role of quality data in promoting green finance, Menon highlighted the often cumbersome and costly data acquisition processes that persist in the industry. MAS’s Project Greenprint aims to establish digital utilities to enhance the collection and usage of climate and sustainability data.
Menon concluded that the five targeted outcomes—inclusive of instant remittance, atomic settlement, programmable money, tokenized assets, and trusted sustainability data—reflect the broader objectives of expanding economic opportunities, enhancing social inclusion, reducing risks, and protecting the environment. He emphasized that collaborative efforts across public and private sectors, as well as international borders, are essential, akin to the elemental interactions of Water, Fire, Earth, Metal, and Wood that foster growth and innovation.