The Singapore Fintech Festival put a spotlight on the race towards financial accessibility, speed and efficiency 

---

The reluctance of regulators in Singapore to embrace cryptocurrency trading was countered by a powerful voice last week: Vitalik Buterin, the inventor of Ethereum.

Ravi Menon, managing director of the Monetary Authority of Singapore, reiterated the view that retail investors shouldn’t have access to buying and selling crypto, but that other aspects of blockchain assets do have potential.

“The real value in the crypto industry comes not from speculating in cryptocurrencies but from tokenizing assets and placing them on a distributed ledger for use cases that increase economic efficiency or enhance social inclusion,” Menon said at the MAS flagship event The Singapore Fintech Festival.

He was followed on stage by Buterin, who gave a keynote address to the packed conference hall.

“It’s easier to say that cryptocurrencies are unstable and have low value in countries like Singapore, where the economy and government are stable,” Buterin said. “But there are plenty of places in the world where cryptocurrencies, even over the last year have fallen in value less than the local fiat currency. If you interview people there, they'll say, ‘well, you know, cryptocurrencies rise and fall, but our local fiat just falls and falls’. So I think it is important to always be mindful of different contexts of that of different regions.” 

He added that he’s “glad that Singapore understands the value of openness, transparency and blockchain technologies and that people are still able to obtain cryptocurrencies for use in their applications should they need it, while at the same time having a good level of protection.”

Regulators and their willingness to embrace the crypto future dominated conversation at the Fintech Festival last week. Some 295 regulators, policy makers and government officials from around the world joined a crowd of 60,000 delegates and 450 exhibitors in the return of the festival as an in-person event.

Menon used his keynote address to outline Singapore’s vision to secure its place as the region’s crypto asset hub - as long as it doesn’t peddle in trading and speculating in cryptocurrencies. “Cryptocurrencies are a non-starter,” he said. “They have performed poorly as a medium of exchange as well as a store of value. Given its volatility and speculative nature, cryptocurrencies do not hold promise to serve as money in the first place.”

MAS Head of Fintech Infrastructure Office Alan Lim, MD Ravi Menon and DPM Lawrence Wong (L to R) photo courtesy of Singapore Fintech Festival

Since its inception in 2016, SFF’s annual theme has been selected to reflect the prevailing opportunities and challenges in the financial sector. With deepening global economic crises, weakened markets, inflation, geopolitical tensions, war in Europe and the worsening climate crisis, there was a lot to flesh out over the three days of the event.

If there was any doubt that the past twelve months have seen the worlds of TradeFi and DeFi converge even further, you just needed to walk the five halls of exhibitors to see major banks and payment providers like DBS Bank, HSBC, JP Morgan, Swift and Visa nestled side-by-side with emerging and established web3 startups.

So what of the crypto future? The conversation around tokenomics has often been as volatile as the markets themselves. Yet, despite the perils facing the world on so many fronts, it seems the appetite for tokenization is very much alive. Many of the world’s governments, institutions and banking behemoths who had previously decried DeFi now seem to be onboard and ready to experiment with its commercial potential and speed, with conditions. 

Menon said that MAS views stablecoins as more promising as long they are well-regulated and securely backed by reserves and that they combine the benefits of stability and programmability. Although their adoption will remain to be seen, MAS has partnered with payments startup Fazz to pilot real life use cases for the StraitsX (XSGD) stablecoin pegged to the Singapore Dollar. XSGD runs on the Ethereum, Zilliqa & Polygon blockchains. 

Read more: Singapore Regulator to Drive Tokenized Asset Adoption at Institutional Financial Firms to Spur Adoption

Singapore is also exploring a retail CBDC system by identifying potential use cases for a programmable digital Singapore dollar. Menon explained that integrity in digital currencies will come with the ability to embed rules into the smart contract to ensure that the digital money sent is used solely for its intended purpose - what he referred to as Purpose Bound Money. Use cases being explored are government vouchers and business grants. 

Menon summarized MAS’s position as discouraging retail investment in cryptocurrencies; facilitating stablecoins through sound regulation; allowing tokenized bank deposits; and experimenting with CBDCs. 

“Asset tokenization has transformative potential, not unlike securitization 50 years ago,” Menon said.

It appears that with its various projects, pilots and partnerships with the likes of JPMorgan, DBS Bank, UOB, OCBC, Grab, Temasek and Fazz that the Singapore government is seeking to carve out their own commercial business model in the digital asset ecosystem. With the SFF 2022 theme centering on resilient business models in volatile times, this seems apt.

The focus of Buterin’s keynote was to update the audience on the direction that Ethereum is taking.

In September, Ethereum moved to using proof of stake to secure its network and cut 99.9 percent of its carbon emissions. The Ethereum developer community is now focused to scaling and stabilizing the network as well as providing improved security and privacy for its users, Buterin said. This includes exploring greater flexibility with wallet access, password recovery and authentication, to match the ease with which people can currently reset passwords and recover accounts for their existing web2 applications. He noted that the improvements will take time to complete.

As for emerging web3 trends to look out for, Buterin sees identity and belonging as a key area of growth. He referred to non-traceable soul bound tokens (which he detailed in his co-authored May 2022 paper titled “Decentralized Society: Finding Web3’s Soul.”) that let people acquire tokens for the communities and affiliations they are passionate about. These types of tokens are also useful to verify members and fans of a particular community.

“These are all existing services that are slowly growing and it feels like there is this organically emerging identity layer that's going to continue to get bigger over time,” Buterin said.