Generative artificial intelligence (AI) has been all everyone has been talking about since it came to the fore a year ago. It is therefore no surprise that the topic dominated the latest edition of Singapore FinTech Festival (SFF), which saw a record number of over 800 speakers, 700 exhibitors and 36 international pavilions across five thematic zones.
This year, the three-day festival was focused around the theme: “AI for good. AI for good?”, and delved into the technology’s promise and pitfalls over multiple panels that debated its role in different sectors and parts of the world.
Opening the conversation on AI on the first day of the conference on Nov 15, newly sworn-in President Tharman Shanmugaratnam said that this technological revolution is set to have a more profound effect on the workforce and society than any previous rounds.
To that effect, the president believes that the financial services sector will be impacted more quickly by evolving technologies such as large language models (LLMs) and AI, compared to other sectors. As such, it is important to think through and find ways to address its distributional consequences, says Tharman.
The conversations were mostly centred around predictions of use cases about the technology, and how it would disrupt society as a whole. What was most evident was that the industry is still learning about the technology. Tharman himself shares that he fiddles around with LLM-based chatbot ChatGPT “for fun” during the weekends.
In anticipation of the onslaught of AI, the Monetary Authority of Singapore (MAS) is set to release a white paper on AI in January next year. Coined Project MindForge, the regulator says that it has concluded the first phase of its efforts to develop a risk framework for the use of generative AI in the financial sector.
Digital money
More concrete have been the follow-ups on the regulatory bodies’ partnerships with private-sector players. Since the announcement of collaborative fintech projects in 2022’s festival, there has been an extensive update on the progress of these partnerships.
Speaking on day two of the festival, MAS managing director Ravi Menon emphasised the need to focus on building a global public good payment utility system. He had in his previous editions regularly highlighted the use of fintech in solving real-world problems.
See also: MAS grants IPA to three entities issuing regulated stablecoins, to step up CBDC experiments
“Fintech is more importantly… about improving people’s lives, about promoting a more inclusive society and about securing a sustainable planet for our future,” says Menon.
The MAS is also working towards the vision of a network of interoperable systems that allows payment, clearing and settlement to take place instantaneously and seamlessly. Three key components to realise this vision include digital assets, digital money and digital infrastructure.
As such, the regulator has granted in-principle approval under the Payment Services Act to three entities that will issue stablecoins that will comply with the central bank’s upcoming stablecoin regulatory framework.
The three entities are StraitsX SGD Issuance, StraitsX USD Issuance and Paxos Digital Singapore (for a US dollar-backed stablecoin). If well-regulated, stablecoins can potentially play a useful role as digital money, alongside Central Bank Digital Currencies (CBDCs) and tokenised assets, says Menon. “It is able to help spur innovative use cases. One example is in purpose-bound money, showcased through Project Orchid.”
The central bank will take its experiments one step further next year as it plans to pilot the live issuance of wholesale CBDCs to instantaneously settle payments across commercial banks. Previously, the MAS had only simulated the issuance of wholesale CBDCs within test environments. The regulator will partner local banks to pilot the use of wholesale CBDCs as a common settlement asset in domestic payments.
To this end, in her keynote address on Nov 15, International Monetary Fund (IMF) managing director Kristalina Georgieva urged governments around the world to hasten the creation of the digital fiat currency, which she describes as a “safe and low-cost alternative” to cash.
“CBDCs can replace cash, which is costly to distribute in island economies… They can offer resilience in more advanced economies, and they can improve financial inclusion where few hold bank accounts,” the ex-CEO of the World Bank says.
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According to the IMF, more than 100 countries are exploring the use of CBDCs. However, only 11 countries have fully adopted CBDCs as of June, says Georgieva. These countries include Jamaica, Nigeria and the Bahamas.
“There is no better place to look at the future of CBDCs than in Singapore”, according to Georgieva. CBDCs would also offer a “bridge” to go between private monies, and a yardstick to measure their value, “just like cash today, which we can withdraw from our banks”, she adds.
Georgieva subsequently announced the launch of the CBDC Handbook, for the collection and sharing of knowledge on CBDCs, for policymakers to adhere to.
Progress in collaborative projects
Meanwhile, under the MAS’s collaborative initiative Project Guardian, several private-sector partners have announced their progress at the festival.
Citi, for instance, has developed a blockchain forex solution that allows the pricing and executing of bilateral spot foreign exchange trades on its application. Their on-chain solution provides real-time streaming of price quotes while recording trade executions on the blockchain. This supports the immutable, cryptographically secure record-keeping of trade data, according to Citi.
The bank had collaborated with T Rowe Price Associates and Fidelity International on its application.
Another Project Guardian progress was announced by UBS, which partnered DBS and SBI Digital Asset Holdings to execute the world’s first live repurchase transaction (repo) of a natively-issued digital bond on a public blockchain.
The repo, which is a form of short-term borrowing that involves one party selling a security to another for cash, involves borrowing tokenised Japanese yen (JPY) against a JPY-denominated natively-issued digital bond. The borrowed tokenised JPY was also used to finance the purchase of the same bond.
UBS says that this demonstrates the potential to cover an entire transaction lifecycle on a public blockchain.
In the wealth management space, JP Morgan and Apollo have tested and demonstrated how wealth advisers could seamlessly and automatically manage discretionary portfolios at scale, as well as include private alternative assets in those portfolios.
In a white paper released on Nov 15, JP Morgan and Apollo say they found that by representing discretionary portfolios as smart contracts, thousands of portfolios could be linked to models — and therefore be automatically rebalanced when market conditions change or when portfolio managers look to invest in different products.
Through the firms’ proof of concept solution, they demonstrated that 3,000 operational steps that had to be executed by a wealth manager when rebalancing 100,000 investor portfolios can be collapsed into just a few clicks. They also estimate that the tokenisation of alternative assets would enable these products to more easily be offered to wealthy individuals, representing a US$400 billion ($540 billion) annual revenue opportunity for alternative fund managers and distributors, among other findings.
On the sustainability front, Menon shares that a simplified environmental, social and governance (ESG) reporting tool has been developed, under Project Greenprint, which aims to harness technology and data for a more transparent, trusted and efficient ecosystem for sustainable finance. The tool, called gprnt.ai, will focus on the needs of small and medium enterprises (SMEs) as a first step, enabling them to leapfrog complexity and costs, according to Menon.
The platform, which aims to unify and synergise current pilots occurring under Project Greenprint, is driven by a new entity dubbed Greenprint Technologies. The entity is supported by the MAS together with HSBC, KPMG, MUFG and Microsoft. This is currently undergoing live testing with selected banks and SMEs, and will be progressively rolled out from 1Q2024.
“Our vision is for Greenprint to become a baseline for how companies report ESG data beyond Singapore,” says Menon.
Perhaps Georgieva of the IMF sums it up best. “No one institution can provide such guidance, we will have to collaborate tightly across international institutions, central banks and ministries of finance,” she says.
“We will be on the high seas for some time. But the potential payoff is clear — a more inclusive international financial system that meets our future needs,” says Georgieva.
The Edge Singapore has been an official media partner of the SFF every year since its inception in 2016, and is one of five media partners this year.
