As all of you already know, I recently had the opportunity to attend the Singapore Fintech Festival 2022 (SFF 2022) from Nov 2nd 2022 to Nov 4th 2022. It was my first time participating in any global fin-tech event but the experience was so profound and enlightening that I wanted to share my experience with you guys.
Firstly, SFF 2022 is an annual event organized by the Monetary Authority of Singapore (MAS). MAS is equivalent to Nepal Rastra Bank and is way ahead in accommodating and assimilating the latest trends in the financial technology domain, an ideal example of a progressive regulatory, a lesson to be learned by Nepalese regulators.
MAS primarily organizes SFF to showcase where Singapore is heading in terms of global fin-tech trends, including their Government, BFIs and Private Tech Companies. Through SFF, they are creating an environment to showcase the latest fin-tech trends, products, services, companies and skilled manpower, and at the same time create opportunities for knowledge sharing, collaboration, funding and networking. Singapore wants to be a leader in the global fin-tech industry and become a hub for all fin-tech activities. In short, SFF is the place to be for all fin-tech enthusiasts.
Being a first timer in a global fin-tech event, everything was very overwhelming and seemed ahead of time. There were many topics to understand and products to go through. Due to the constraint of time, attending every presentation and going through each exhibit was not possible. From the presentation and exhibits that I did get to experience, I want to outline the following topics of interests: -
- Vision of MAS.
- Digital Assets and Web3.
- ESG and Sustainable Finance.
- Embedded Finance.
Let’s go through some of the topics in a bit more detail.
Vision of MAS
As I already mentioned, MAS in the central monetary authority of Singapore and is highly accommodating and accepting of latest fin-tech trends and technologies. They have set their own vision for digitizing Singapore’s financial industry and are collaborating with several national and international BFIs and fin-tech companies, in various projects, to convert their vision to reality.
In the presentation by, Mr. Ravi Menon, Managing Director at MAS, he clearly outlines what MAS is currently aiming to achieve and how they are going about to achieve what they are aiming. The title of the speech is “FinTech in its Element: Water, Metal, Fire, Wood, and Earth”. As we all know there are five basic elements of the Universe – Water, Metal, Fire, Wood and Earth. Drawing from this analogy, MAS has also categorized their vision into five elements. They are: -
- Cross-border payments should flow seamlessly like water, by building real-time payment systems across counties. MAS is working on Project Nexus to achieve this goal. Most of the countries already have instant payment systems that allow people to send money to each other within seconds. However, sending money abroad is often still slow and expensive. Connecting these national systems internationally could improve the speed, cost and transparency of cross-border payments. Project Nexus is a model for connecting national payment systems into a cross-border platforms.
- Atomic settlements should be strong and secure like metal, to eliminate settlement risks and duplicate reconciliation. Atomic settlement refers to simultaneous exchange of assets. MAS is working on Project Ubin+ to achieve atomic settlements. This project focuses on 3 areas – to study business models and governance structures where settlements can be performed atomically to improve efficiencies and reduce risks; to develop standards to support atomic settlement of currency transactions across DLT and non-DLT platforms; to establish policy guide for the digital currency infrastructure across borders for better access and participation.
- Programmable money to reshape money like fire using crypto, stablecoin, tokenized deposits and CBDCs. MAS is working on Project Orchid for programmable money. Programmable money is money with in-built rules and that comes with constraints for the user. With these rules, money could also be programmed to have an expiration date or be restricted for certain goods.
- Tokenized assets. Like wood growing into trees, MAS wants to nurture tokenized assets in order for assets to be fractionalized and monetized. MAS is working on Project Guardian – to explore the use of public blockchains and DeFi protocols to digitize assets (both traded and non-traded) and to build open, interoperable networks that enable digital assets to be traded across platforms.
- Trusted sustainability data for a green transition that is grounded like earth – which is key for sound decision making. MAS is working on Project Greenprint to harness technology and data to enable a more transparent, trusted and efficient ESG ecosystem to enable green and sustainable finance.
Digital Assets and Web3
Let’s start with a brief introduction of Digital Assets and Web3.
Digital assets are anything in digital form that has value, established ownership, and is discoverable. Some of the familiar digital assets are – photos, documents, videos, audio etc. With the growth of blockchain technologies new era of digital assets have emerged, like – Cryptocurrencies, NFTs, Tokenized Assets, CBDCs etc.
Web3 is an idea for a new iteration of the World Wide Web. It refers to a decentralized online ecosystem based on blockchain that gives power back to the users in the form of ownership. Web3 is decentralized, permission-less, has native payments and trustless. Web3 gives you ownership of your digital assets in an unprecedented way. No one has the power to take away your ownership but you.
Coming back to the Web3 in financial world, a decentralized financial world begins with the foundation of digital assets. Blockchain allows developers and the projects they support to tokenize value and create digital assets. This can be in the form of a cryptocurrency - a utility token for transactions on a blockchain network, stablecoins pinned to the value of a currency or an NFT representing digital art.
These digital assets manifest their value based on the market economics of the blockchain they sit on and the perceived value of the asset by the broader market. No single centralized authority issues these assets or seeks to control their supply or value. Assets can be traded freely and directly in a peer-to-peer manner, without the need of intermediaries. Proof of ownership of the asset exists decentralized across the blockchain, providing resiliency, privacy and security.
This concept of decentralized finance DeFi seeks to replace our traditional finance TradFi model.
DeFi is still rudimentary and requires reimagining before markets can safely transition from TradFi. As iterated in SFF, to increase public acceptance we must encourage research, learning, map our journey and share the experience with the rest of the market. It is time for institution to establish their place in this ecosystem, while regulators must set clear parameters for what we should and shouldn’t be building. Regulatory must ensure that platforms prioritize their customers’ interests rather than their own priority.
To put digital assets and Web3 into perspective, the download of web3.js increased even in the recent crypto market crash. Also, companies like Nike and Startbucks are have started investing in NFTs. Nike even recently sold an NFT sneaker for $134,000.
ESG and Sustainable Finance
Sustainable finance refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects. ESG is a framework that helps stakeholders understand how an organization managers risks and opportunities around sustainability issues.
Environmental considerations refer to an organization’s environmental impact(s) and risk management practices. Social considerations refer to an organization’s relationships with its stakeholders. And Governance refers to how a company is led and managed and what types of internal controls exist to promote transparency and accountability by leadership.
As blockchain becomes more mainstream, questions are raised over its intensive consumption of energy and environmental impact. However, a new generation of blockchains have emerged that promise significant reductions to energy use, like – Algorand, Polygon and Chia. Also, widely used blockchains like Ethereum is also trying to re-invent their protocol for reduced energy consumption, as explained by Vitalik Buterin, co-founder of Ethereum, in his presentation as SFF 2022 titled “The Great Merge: Re-architecting Ethereum”.
There is massive market for sustainable finance but also challenges with its maturity.
Embedded finance is non-financial companies offering financial products and services. It could be an ecommerce merchant providing insurance, a coffee shop app that offers 1-click payments, or a department store’s branded credit card.
Effective embedded finance solutions meet the customer where they are, with a financial option they need, whether that be a loan, payment program, insurance plan or something else. Embedded finance brings financial services to the exact moment it’s needed.
The most common embedded finance offerings include banking, lending, insurance, payments, and branded credit cards.
Other Topics of Interests
As I told you earlier, SFF 2022 covered a lot of topics that I haven’t described here. Some of them include – International Growth Market, Fintech Regulation, Pension and Wealth Management, Banking-as-a-Service (BaaS), Insurance-as-a-Service and many more.
Sources to Quote
Most of the writing in this document are my own doing. However some of the topics are beyond my capacity of explanation, so I have compiled explanations from various official and un-official websites. Google was a great help to this. The searches were random and I haven’t bookmarked each and every source. You’ll need to do your own due diligence if you want to further learn about these topics.
SFF 2022 was great learning experience for me and by drafting this document I only want to share that experience with you and re-ignite your hunger for knowledge. Peace out and keep learning.
Bonus: Acronyms commonly used in SFF 2022
AMM = Automated Market Maker
BaaS = Banking-as-a-Service
CBDC = Central Bank Digital Currency
CDA = Crypto and Digital Assets
COP = Conference of the Parties
DAO = Decentralized Autonomous Organization
DeFi = De-centralized Finance
DLT = Distributed Ledger Technology
ESG = Environmental, Social and Governance
MAS = Monetary Authority of Singapore
NFT = Non-fungible Token
SFF = Singapore Fintech Festival
TradFi = Traditional Finance