While there is growing interest in emerging digital technologies like cryptocurrency and decentralised finance (DeFi), its promises cannot be realised in a single step.
Instead, the centralised and decentralised financial markets — the proverbial old and new worlds — will have to co-exist, says Loh Boon Chye, CEO of SGX Group. “We will need to see how we can bring the best of these two worlds together.”
Citing the adoption of cloud technology, he says Singapore’s financial industry should be mindful not to jump the gun with new technology, but rather, focus on engaging customers and stakeholders.
“For exchanges, there has been much discussion about moving data, trading and clearing services onto the cloud,” he adds. “[This] would impact our market participants and we are highly cognisant that it is a decision that must be undertaken together with them.”
That said, the industry cannot remain stagnant, says Loh. “There will always be stakeholders and customers who take the view that they are very happy with the traditional methods and that new technologies could be more hype than substance.”
He adds: “We must be careful we do not fall into the trap of creating a solution to a problem that doesn’t exist.”
The price tag on innovation
In his keynote speech at the Investment Management Association of Singapore (IMAS) Digital Summit 2022 on April 20, Loh outlined the bourse’s conservative approach to cryptocurrency.
“In Asia, institutional and retail participation in crypto continues to rise… While SGX has not offered crypto futures like the other exchanges in the US and Europe, we have been exploring and monitoring this space closely to develop the right products that meet the needs of our customers,” says Loh.
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He urges the financial industry to look deeper at cryptocurrency past the volatile prices and flashy headlines. “Beyond looking at crypto as an asset or investment, store of value or payment, I believe it is more important for us to look at how we can leverage the technology behind crypto and digital assets.”
The future that DeFi promises will take some time to become reality, he says. “There would be some trial and error and experimentation. Ecosystems need to be ready for an entirely new DeFi-run financial system that is independent of the traditional financial infrastructure.”
Policymakers, too, must address risks through standardisation and regulation, and put in place safeguards to ensure market stability, he adds.
“Technology and innovation come with a price tag,” says Loh. “While AUM [assets under management] may grow, so too will costs and pressure on margins. The digitalisation journey is not an easy one, and we have to strike a balance between innovation, tangible benefits, risks and rewards. Throughout this journey, what is key is that we have to put customers at the heart of everything we do.”
Green capital
Loh also highlights the role of asset managers in sustainability by way of mobilising capital.
“Investors, especially the next-generation millennials, are looking to invest their money in an impactful way. Last year, flows into ESG [environmental, social and governance] funds in Asia more than doubled to over US$100 billion [$136.4 billion],” he says.
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SGX is partnering the Monetary Authority of Singapore (MAS) to develop an ESG portal whereinvestors can access ESG data, as reported by issuers, in accordance with aligned metrics and disclosure requirements.
Says Loh: “This portal will not only make information more accessible and comparable, but would also save costs, make data more transparent, and simplify decision-making for investors.”
Loh also points to Greennode, the ESG bond database launched in January by SGX-Temasek digital asset venture Marketnode. With more than 300 issuers and 500 bonds, Greennode is seeing healthy interest from asset managers, says Loh.
“In the pipeline is Greennode RMB, the first global onshore China ESG bond data platform in Chinese and English, established through a partnership with onshore China partners.”
Whether it is adopting Web 3.0 or fighting climate change, today’s challenges can no longer be addressed by one country, one industry or one company, says Loh. “Competition should not only be about winners and losers; the ecosystem matters.”
Photo: SGX
