SINGAPORE (Sept 14): Singapore’s financial services sector has what it takes to be a global leader in the adoption of blockchain technology.
Blockchain technology refers to the tamper-proof de-centralised ledger technology that cryptocurrency bitcoin is closely associated with.
Singapore with its highly educated workforce and ability for the government to move swiftly potentially might make it a leader in the future according to Stephen Obie, partner with the law firm Jones Day.
“First, the highly educated workforce here enables fintech (financial technology) companies a vast pool of people to find talented workers,” says Obie.
(See also: IBM sets up blockchain centre in Singapore)
“Second, the ability for the government to move swiftly in terms of encouraging the adoption of the technology, whether it is through using blockchain technology for issuing Singapore government bonds or other applications, the ability to move swiftly and decisively will give
Singapore the edge,” he adds. The Monetary Authority of Singapore and Prime Minister Lee Hsien Loong recently called on the financial sector to harness the technology to stay ahead of the competition.
While regulators warm up to the possibilities of blockchain technology, banks in Singapore have been making piecemeal efforts to adopt blockchain, with banks like Bank of Tokyo testing it for digitising cheques, and Merrill Lynch and HSBC developing uses around letters of credit.
For wide spread adoption to be possible, issues of scalability has to be addressed according to Herriet Territ, partner, Jones Day.
“Banks are adopting slowly because blockchain technology has not yet been scaled to the level they need it to be, even bitcoin does not do the same amount of transactions a bank does in any one day,” says Territ.
However, Obie believes that the technical issues are being worked on and financial institutions’ excitement around blockchain is a far cry from just a few years ago.
“Whatever needs to be done to overcome these ‘humps’ it seems like the best and the brightest in the financial institutions are concentrating on it,” says Obie, “that’s a big change from two to three years ago, when people’s eyes would glaze over when you talk about blockchain.”
As for future consumer products around blockchain, regulators still lean on the conservative side according to Territ.
“For consumers there are issues like transparency and protection of consumers, so you’ll see regulators be a little more conservative,” she says.
Left to right: Raj Karkara, chief operating officer, tØ; Herriet Territ, partner, Jones Day; Stephen Obie, partner, Jones Day
While regulators may grapple with fully understanding the impact blockchain might have on consumers, companies like tØ – a blockchain-based private and public equities trading platform – are already working with regulators to develop blockchain products that consumers could potentially use.
“The thought has been to work closely with regulators to demonstrate to them how it works in existing regulatory frameworks,” says Raj Karkara, chief operating officer, tØ.
While technical and regulatory concerns around blockchain might still remain, the gift of ultimate transparency is something that is hard to turn down.
“The immutability of the blockchain gives you ultimate transparency…it would show everyone and give ultimate visibility on what occurred, and this is something that average person is clamouring for in the financial marketplace,” says Obie.