Why can Singapore's financial industry break through technology silos?

Wen | Visiting Professor of National University of Singapore and Dean of the White House School of Finance

The Monetary Authority of Singapore favours balanced and principled supervision of the financial industry, creating an open, inclusive and stable financial environment. Its financial technology innovation and development is one of the global leaders. These not only profoundly and positively affect financial development, but also promote the inclusiveness and inclusiveness of economic, industrial and social development of the island nation. The author further combs the HKMA's regulatory attitude towards fintech represented by cryptocurrencies from the two aspects of the top-level design of the regulatory mechanism and the tools and methods. From the top to the specific implementation, the HKMA insists that professional people supervise professional affairs, follow development, and make efforts to encourage innovation and prevent risks.

HKMA's "appropriate control over regulatory efforts" is the main reason for the healthy development of finance

Before joining the HKMA, I had more than 20 years of experience in the financial services industry, and I could use my experience as a regulated and supervisor to understand the development of Singapore's financial market from different perspectives. Since the outbreak of the Asian financial turmoil in 1997, the sound and advanced development of Singapore's financial services industry has been inseparable from the construction of the industry's software, hardware, and talents. At the same time, do a good job of development and supervision to achieve a delicate and good balance between innovation and stability, and risks and security (which innovation may bring).

On the top-level design of the mechanism, the first is that the HKMA is responsible for the functions of supervision and development at the same time. Because of the common goal, it can properly communicate and debate health. Finally, it can make decisions that can balance development and supervision. The development of a secure but also advanced financial center.

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Secondly, in terms of law, the HKMA is accountable to the highest legislative body, Congress, and is not subject to government administration, so it can maintain a certain degree of independence and autonomy in its daily operations. For example, in terms of talent recruitment, incentives and retention policies, compared with some other countries, the HKMA has certain flexibility and implements market-oriented operations. In particular, the middle and senior managers hired are mostly professionals with professional knowledge, practical experience in the industry, knowledge of industry operations, and in-depth understanding of financial products and services. Professionals can supervise professional matters in time to make policy adjustments in accordance with the needs of industry development, avoiding "bureaucratic" supervisors in other countries, and the lag and "big turn" that may occur when formulating policies, Ensure the timeliness and continuity of the policy.

The third is "less management in advance, more attention to supervision during and after the event." The HKMA believes that industry players have greater market insight and know how to explore market needs, and then develop products that meet customer needs. Therefore, the HKMA generally does not manage much of the product's early development ("prior"), which gives entrepreneurs more room for innovation. However, after the product is designed, the HKMA will focus on monitoring during the sales promotion process ("in the matter") to ensure that the industry sells the appropriate products to the appropriate customers, and to make correct, comprehensive and timely product disclosure to customers. . Similarly, after-sale services ("after the fact") by the industry, such as whether to provide reasonable liquidity, whether to provide product valuations on time, and other measures to ensure that consumers' interests are protected are also part of the HKMA's key supervision. Through the regulation of different products in different cycles, the balance between innovation and safety is achieved on the premise of protecting the interests of consumers and investors.

Regarding the methods and tools of supervision, especially for new areas such as fintech or digital financial assets, the HKMA tends to do more “principle-based regulation” and less “rule-base dregulation”. The so-called principled supervision is to fully communicate with the supervised in advance, inform the supervision purpose, explain the basic supervision principles, and encourage the industry to conduct self-management and supervision based on disclosure. On the premise of maintaining financial stability and protecting the interests of financial consumers, industry players are encouraged to carry out business innovation. The HKMA's balanced supervision is managed, regardless of what it is, not everything. Without triggering systemic risks and affecting financial stability, the HKMA will allow market vitality to innovate and market discipline to play the role of "the survival of the fittest." Under the framework of large development guidance, to give some new space for development, especially the current development of financial technology such as blockchain and cryptocurrencies, the attitude of the HKMA has played a good guiding role.

Attitude towards FinTech

At present, governments of different countries have inconsistent attitudes towards fintech, and Singapore is currently in the middle of the regulatory scales, focusing on balance, caution and relative openness. At the Singapore Parliament meeting earlier this year, Deputy Prime Minister and Chairman of the Monetary Authority's Board of Directors Shandaman stated that the government was open and tolerant of emerging technologies. The government believes that when the potential of a technology has not been fully tapped, premature regulation may limit the development of technology, so it is particularly important to grasp the timing of regulatory entry.

The HKMA divides cryptocurrencies into three main types: Payment Token or Virtual Currency similar to Bitcoin, Utility Token, and Security Token to perform classified supervision. Of these three types, securities cryptocurrencies are regulated. Although there are currently no special regulatory regulations, because of its investment nature, which is essentially securities, it must comply with the provisions and supervision of the existing Securities and Futures Law, which is also a clear practice in most countries.

For payment cryptocurrencies, the government will introduce a new "Payment Services Act" to supervise, in particular to prevent risks related to money laundering and terrorist financing. As for practical cryptocurrency, because it can be used in exchange for the right to use certain products (including the use of blockchain technology) or services developed by the issuer's innovation, the HKMA currently gives it a great deal of innovation space. The HKMA also stated that it pays more attention to the application of blockchain technology to improve financial services and the real economy.

Regulatory developments are not forgotten, and the HKMA attaches great importance to open innovation. It is necessary to break the technological silos, open up innovation channels through common platforms and standards, enlarge innovation dividends, and extend financial services and industries to the last mile of the real economy, which benefits all people. The best example is the launch of the unified card reader terminal by the HKMA and relevant authorities in 2016, and the integration of 27 different electronic payment services recently, and the launch of a two-dimensional code "SGQR" code that can be used for scanning. However, the author believes that it is better to brainstorm under the organization of industry associations and encourage industry to adopt a common platform and unified standards in the early stages of innovation. This is more in line with the business considerations of the industry than being forced to accept the platforms and standards set by the relevant authorities in the later stage; industry self-regulation is also welcomed by the HKMA.

In view of this, the Blockchain Enterprises and Scalable Technologies Association (BEST), an industry self-regulatory organization recently led by former Singaporean Yang Muguang, Professor Li Guoquan of Xinyue Social Science University, and the author, recently founded the chain. Based on the underlying technology of the blockchain, it will promote the application of scalable new technologies such as artificial intelligence, the Internet of Things, and drones, and encourage the development of a common platform and unified standards, and promote the inclusiveness of financial services and the physical industry. And compliance, go deep into the private sector, go deep into small and medium-sized enterprises, and truly achieve financial inclusion.

At the Singapore Fintech Festival 2018, Mr. Shandaman, the Chairman of the Board of Directors of the HKMA, hosted the introduction ceremony for the API Exchange (APIX). This is the world's first cross-border, open platform. Its primary task is to match financial institutions and fintech innovation companies in the Asia-Pacific region, promote cross-border cooperation, and provide them with common standards and shared APIs to support financial services innovation and innovation in emerging markets. Inclusiveness, promote better cooperation and innovation between fintech and industry, and promote the growth of the digital economy.

The author believes that the HKMA has put on a "cap for promoting the development of fintech". Its creative and wise approach will break the issue of technology silos and allow different emerging technologies to have channels, standards, methods, and platforms, which can be effective Unleash the dividend of innovation, and finally achieve a balanced and orderly and healthy financial development of supervision and development, innovation and security.

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