Singapore must be at forefront of the blockchain technology race

Fri, Oct 27, 2017

SINGAPORE'S status as one of the world's major financial centres has enabled it to set standards for fiduciary responsibility. With disruption sweeping through the global financial industry, keeping the financial hub status has become increasingly dependent on the ability to set standards in the use of technology to deliver a top-notch level of customer service.

Hence, a recent speech by Ravi Menon, Monetary Authority of Singapore's (MAS) managing director, stating in clear terms that innovation and technology will be the main drivers in Singapore's financial services sector (as across the economy as a whole) is welcome news.

Delivering a keynote address at a global blockchain business conference in India earlier this month, Mr Menon noted that distributed ledger technology (DLT), also known as blockchain, has the potential to transform many industries and economic activities.

The power of blockchain in financial transactions lies in its ability to shift the trust from a centralised institution (such as banks) to a decentralised consensus between participating entities. This, according to research agency Forrester, can spur a new wave of innovation for collaboration and transaction in areas such as trusted value exchange, digital asset management, and smart contract execution.

Blockchain could, for example, be used as an alternative to credit bureaus that compile consumer credit information from banks. The insurance industry in Singapore is looking at how blockchain can help prevent duplicate insurance claims. Another potential application of blockchain lies in the vital but tedious process of customer verification.

In trade finance, DBS Bank and Standard Chartered Bank have been experimenting in the use of blockchain to prevent the problem of duplicate invoicing while preserving client confidentiality. Singapore is also looking into how blockchain can be used to link the National Trade Platform to trade platforms in other economies, such as Hong Kong. Another major initiative is Project Ubin which is a collaborative project to explore the use of blockchain technology for clearing and settlement of payments and securities.

Developing a strong blockchain ecosystem is part of Singapore's broader fintech strategy and there are now about 50 locally based fintech startups in the blockchain space. Tertiary institutions are also doing research in various aspects of blockchain - and should train up students with the essential knowledge and skill sets in the area, and fintech more generally. Meanwhile, venture capitalists are looking for interesting ideas to invest in.

Singapore is of course not alone in investing money, talent and effort into developing blockchain applications. In the Asia-Pacific region, for example, China has included blockchain in its national information planning of its 13th five-year plan while, according to Forrester, Australia has committed US$350,000 to develop blockchain standards. India, Japan, South Korea and a host of other nations have also made substantial investments, both in terms of money and human capital, to develop blockchain. Blockchain has turned into yet another technology race that Singapore can't afford to fall behind in. The good news is that MAS is very much in the game, as far as projecting Singapore as a global centre for developing and testing blockchain applications.