, With a population of less than six million people. The small city state is the base of around 40 percent of fintech companies in the ASEAN region.. Here we don't see the difference between fintech and banks.. Both are complementary, they come together., They work together.. This is Sopnendu Mohanty, chief fintech officer at Singapore's, Central Bank and Financial Regulator, Monetary Authority of Singapore.. In anticipation of this year's, Singapore fintech festival, Blockshow collaboration. We discuss Singapore's, unique approach to crypto and blockchain. I'm Giovanni your host. Welcome to another Cointelegraph interview.. How are you Sopnendu, I'm, extremely fine, good time.. We saw that other Asian countries, like China and South Korea have been adopting quite a tough stance on cryptocurrency lately.. On the other hand, Singapore has adopted a very different approach, which is much more friendly., So why has Singapore decided to adopt this approach? Look the word friendly could be highly misleading.. We are friendly to everything in life to good ideas. Good good people, talent, good purpose., So being friendly to crypto doesn't mean that we're adopting crypto. Because different jurisdictions face their own issues and concerns.. Some have currency challenges that they're worried about that will circumvent the controls.. We see benefit through the lens of innovation. And outright banning cryptocurrency doesn't really help to understand the risk and what it comes to what comes with the crypto., So allowing crypto to be an experimental construct in Singapore is what we are looking at.. Of course, we are worried about money laundering and we have very strong policies in place to manage a guard against money laundering and terrorism.
Financing. And more importantly, we have a very, very thoughtful expanded Payment Service Act which today governs the crypto exchanges and other places that are dealing with payment tokens.. So we have regulations in place.. We have safeguards in place., We have advisories in place.. We constantly advise people the risk of cryptos, but we don't stop if there are experiments which is going on crypto, which can lead to something good but that's to be to be looked at. And we hope that that's, the outcome comes out of this whole crypto exercise.. The head of the MAS Ravi Menon last year said that Singapore does not regulate the technology, it regulates the use cases.. So can you comment on this quote explaining what the head of MAS meant.? What Ravi really meant was technology itself is neutral.. It is the business activity that poses risk., So we applied the regulations. Accordingly. We operate on the principles of same businesses, same risk same rules., One example. We are a guide to digital token offering.. We have clearly laid out examples of different use cases. The type of business activity they are engaging in and the regulations applicable to the business activity.. Now you have to expand and extend that what we spoke about. The end of the technology is to enable something.. We look at that something whether that something has got the right outcome and that right and that process of getting that outcome does it create risk. If there are risks, we think about regulations which can help to offset that risk.
. So the technology itself is an enabler, not the product itself.. So for the past four years the MAS has been experimenting with blockchain technology within the framework of Project Ubin.. So Project Ubin reached the phase five this year in the summer and it developed multi currency payment network in collaboration with JP Morgan and Temasek.. Can you give us a little bit more details regarding what this phase five of Project Ubin means? This platform gives you the ability to transact, with each other, on the network digitally and directly in different currencies, which previously you were able to do only in Singapore dollar.. Now this brings a wide range of benefits, especially when you have when you have to do payments in multiple currencies.. This can be much cheaper, faster around the clock.. A more liquid FX market could result in better FX rate discovery and the settlement of foreign currency denominated securities become far more simpler.. In phase 5, we tested out the integration with other blockchain based platforms, to enable end to end communication across many industries and use cases which runs on top of this multi currency network., And this were live. Technical integration with transactions happening across the payment networks. The different networks., Some of the use cases we tested where, for example, a delivery versus payment for settlement with assets on private exchanges., Very, very pertinent to this particular use case, sometimes use cases on conditional payments and escrow finance networks, payment and integration with healthcare.
Claims. Again, this is a perfect example where you need to have blockchain based network based on a smart contract to trigger a healthcare claim., And it could be multi currency.. Ok, so maybe you can explain to our viewers why blockchain technology is so important and fundamental for the functioning of this multi currency payment network In this world of complex processes. We always look at processes as a different stream of activity. And having a blockchain with a distributed. Ledger simplifies the process of checking against each other., So having a distributed ledger by design, takes away the whole complexity behind of settling things checking things., And it allows some of the business rules to be built into the use cases so that the payment process and the Settlement process, the underlying business rule can be encoded to a single stream.. Today, in the current world, there are two different processes. There's, a process where you pay each other and there's a process which we exchange goods and services. They're. Two different processes. Blockchain digital currency brings together these two processes to a single process. In a single process. You'Re not only paying each other, but also ensuring the goods and services are also exchanged at the point of payment.. Now I would like to talk about the CBDCs or central bank digital currencies, which is one of the hottest topics at the moment.. What is the stance of the monetary authority of Singapore towards the CBDCs? Are you planning to develop your own digital currency soon? I think when people talk about CBDC, they implicitly think about a retail CBDC or a non wholesale CBDC.
. We have been in particular very, very focused on one part of CBDC. That is the wholesale CBDC.. In fact, I'd argue that we are the first central bank globally to actually pick up the wholesale part of CBDC and run with multiple experiment. And there's. The reason behind why we did this because we are a small country.. Our existing payment system has the most optimal infrastructure.. I can move money from from. My account to my colleague account Jaclyn's account in three clicks money with zero cost., So there's no real driver behind retail CBDC.. What really we are looking for is a wholesale CBDC, because wholesale CBDC brings a significant efficiency optimization in this whole process. And that's. The reason we have been very, very vocal and very, very focused on the wholesale CBDC.. In fact, I made a statement. I don't think we should do any more experiment in the wholesale CBDC.. We have done enough experiments.. We should not think about going into production and get it implemented and take the benefit of all the good work done on the wholesale space globally., And this is MAS example, but I have exactly the opposite example for you. Let's. Take the example of Cambodia and the example I would like to bring in is the Cambodia's Bakong project. And today, if you go to their website, you will see it says. The Bakong project is actually a real time: growth, payment, system., It's, actually, a payment system which runs on a retail CBDC.
And what it says. It says that you can move money and with an efficient retail CBDC, which is part in that payment system. And why? It is an interesting example because Cambodia leapfrogged traditional RTGs system to use an industry driven retail payment system as a way to deal with retail payments., So some different examples are different. Use. Cases. Different need are driving different central banks, interest behind CBDC.. So, back in June, the MAS has announced that it was going to collaborate with China in the development of a CBDC technology.. Can you tell us more details about what this collaboration was about and what kind of results that brought We work with many central banks and one of the central banks which we are interested to work with is the People's Bank of China.. They are doing their production, their pilot trials for retail use.. We are talking to them.. Can that be about a broader partnership where we, what are they learning from their pilot trials. And what we are learning from our wholesale trials. That's the way to collaborate and find a way. Together, we can do something in the space., So this is very early stage Of discussion. We hope, as we get to some tangible projects, we should be able to share more what is happening in that space.. So DBS, which is Singapore's largest commercial bank and the largest commercial bank in Southeast Asia, is going to launch its own cryptocurrency exchange, which is going to be regulated by the MAS.
. So what do you think is going to be the impact of this launch on the whole South East Asia, cryptocurrency market You're? Referring to that so supposedly they're launching a cryptocurrency exchange. Look? This is a natural progression in any innovation, and there has been a very clear growing interest in digital assets and that there's a need there's a definite need for customer service. For this last year. And I've been talking about it for the last two years that, as this digital assets are coming through in different forms and shapes there's, a need to think about a very, very nice custody service for these assets with all the hacks and all The complex processes goes behind it., So it's only natural for a finance ministers like DBS to look to capture this opportunity of providing custody service for digital assets. And there'll be greater competition in this space.. I think DBS is thinking about it. Definitely. That's, a very smart thinking and different institution will have a different level of operational skills and they'll provide different kinds of services to provide the necessary custody need for such assets., As, as you always hear that fintechs are always pushing banks out of that comfortable. Traditional finance, space. And it's very encouraging for us to see DBS to think about such new areas where they can add value and create a new service., And this is truly a sign of the maturity of the Singaporean tech. Sector. And, I always said the fintech sector.
In Singapore would be quite unique from the rest of the world, because here we don't see the difference between fintechs and the bank. To us. It is that both are complementary.. They come together, they work together.. In some cases, fintechs are providing a competing financial services and if they do, we have an ability to regulate them.. In most cases, fintechs are working with the bank so that banks can launch innovative product. Banks can digitize faster and that's the sign of a partnership.. So we are quite thankful to our ecosystem to show that those maturity in thinking as we progress, forward. Singapore's central bank, is going to host its fifth fintech festival this year and this year it will be in collaboration with Blockshow, which is a cryptocurrency conference.. So can you tell us what is the purpose of this collaboration from the point of view of the monetary authority of Singapore? This time the background drop is COVID crisis. And we want to ensure that the content has relevance to the crisis. We are all going through.. We are focused on many of these aspects of recovery.. We have. We have a day on economic summit, we'll talk about all the necessary economic thinking behind how to recover faster. We have a day we'll talk about the infrastructure required to digitize faster.. We have a day on impact impact on society impact on the green climate change.. We also have a day for investors another day for talent.
. Now, for each of these days, we have something on the crypto space, something on the blockchain space.. We are going to share with you speakers.. We are not going to give you a very generic word about blockchain and crypto. They'll. Be asked very tough questions on how that how the crypto is useful, How much they have progressed where's the seed going? What are the regulatory challenges behind it? What should we do other regulators to make it work? Now the question you asked about Blockshow? Why Blockshow.? I think I personally personally I've been extremely impressed by what they've done in the space. And I spoke in their event. They bring up a strong lineup of speakers who join the event and they have a very different way to showcase the whole space. What goes on in blockchain and crypto.? They are not championing a certain view of crypto or blockchain. They try to bring a diverse set of opinions, partners, participants to this whole platform and try to get a better narrative of blockchain. Thanks a lot Sopnendu.. It was great to have you on our show.. Thank you. Thank you for having me.. It was a pleasure. That was Sopnendu Mohanty chief fintech officer at the Monetary Authority of Singapore. I'm Giovanni, your host.. If you enjoyed the interview, don't forget to subscribe to our channel.