Due to its free market economy, high levels of education, sophisticated digital infrastructure and investor-friendly laws, Singapore is considered an attractive destination for blockchain-based businesses. Much of the government’s regulatory efforts have focused on the technology’s application to financial services such as through cryptocurrencies and Initial Coin Offerings (ICOs).
Cryptocurrencies and Initial Coin Offerings
Following the exponential rise in the use of ICOs, as a means of raising funds, the Monetary Authority of Singapore (MAS) issued a statement, in August 2017, clarifying that the offer or issue of digital tokens in Singapore will be regulated by MAS, if the digital tokens fall within the definition of “securities” regulated under securities laws (66). Following this statement, MAS published a “Guide to Digital Coin Offerings” (67), bringing more legal certainty to the space and encouraging ICO use. The Guide classifies tokens into 3 types: utility, payment and security.
As far as cryptocurrencies are concerned, during a Parliamentary sitting in October 2017, the Deputy Prime Minister, Mr Saktiandi Supaat, shared the government’s planned approach in this area. He explained that while MAS does not currently regulate cryptocurrencies, it intends to establish a New Payments Framework(68). This framework will address the associated risks such as money laundering and terrorist financing. He added that, as far as ICOs are concerned, there are no current plans to implement specific legislation. However, they will continue to monitor the development of such offers, and consider more targeted legislation if needed in future.
Singapore Customs Authority — Networked Trade Platform
In September 2018, the Singapore Customs Authority announced the launch of the Networked Trade Platform (NTP) (69), a one-stop trade platform to help digitise trade processing for traders, logistics companies, carriers and financiers. Whereas currently there can be dozens of documents exchanged via email or even courier, taking days or weeks, the (NTP) is designed to bring the entire ecosystem to a single online location, where they can trade and transact with each other. The NTP is currently in collaboration with MUFG Bank and NTT Data Corporation on a Proof-of-Concept which connects NTT Data’s prototype platform using blockchain technology with the NTP, to facilitate secure and efficient cross- border trade data flows.
As part of its mandate, MAS is working on a collaborative project with the industry to explore the use of Distributed Ledger Technology for clearing and settlement of payments and securities.
Project Ubin: Central Bank Digital Money using Distributed Ledger Technology (70) aims to help MAS and the industry better understand the technology and the potential benefits it may bring through practical experimentation. The project has gone through a number of phases:
- Phase 1: In December 2016, MAS partnered with R3, a consortium of banks and regulators specialised in digital ledger technologies, to develop and apply a blockchain-based transaction process with a digital Singaporean dollar. This would not only allow incorruptibility through a decentralised trust system, but it would allow transactions to run 24 hours a day with no centralised (i.e. human-based) checks required. It invited a number of different banks to participate in the early development and trials of the technology.
- One of the main challenges the stakeholders faced during phase 1 is that, due to the very nature of financial transactions, some level of privacy is required to protect transactional actors. There is a crucial need to develop some types of privacy settings within a system – blockchains – whose very principle is full information in a decentralised decision-making context. Phase 2 of the project thus aimed to develop such privacy settings and answer the question of: How can I prove that a transaction has occurred and the necessary funds needed for the transaction are indeed present, without showing you the transaction, and without having to refer to a centralised authority?
- Phase 2: MAS and the Association of Banks in Singapore (ABS) announced on 5 October 2017 that the consortium which they are leading successfully developed software prototypes of three different models for decentralised interbank payment and settlements with liquidity savings mechanism.
- Later, in August 2018, MAS and the Singapore Exchange (SGX) announced a collaboration to develop Delivery versus Payment (DvP) capabilities for settlement of tokenised assets across different blockchain platforms. This will allow financial institutions and corporate investors to carry out simultaneous exchange and final settlement of tokenised digital currencies and securities assets, improving operational efficiency and reducing settlement risks. Three companies – Anquan, Deloitte and Nasdaq – were appointed as technology partners for this project. They will leverage the open-source software developed and made publicly available in Project Ubin Phase 2. The successful conclusion of the DvP project was announced on 11 November 2018.
- MAS also published in November 2018 a joint report, with the Bank of Canada (BoC) and Bank of England (BoE), assessing alternative models that could enhance cross-border payments and settlements. The report examines existing challenges and considers alternative models that could in time result in improvements in speed, cost and transparency for users.