Distributed Ledgers and Smart Contracts Revolutionize Singapore’s Financial Services Industry
A New Path for Blockchain Technology
Most people see "blockchain" and "funds" in the same sentence and immediately think of pools of money betting on cryptocurrencies such as Bitcoin and Ether. That isn’t how Singapore sees the utility of distributed ledgers. The Asian financial center has taken a less glamorous view, which may be more useful.
The Current State of Affairs
Singapore has more than 1,200 asset management companies supervising S$146 billion (US$112 billion) in so-called collective investment schemes. Unlike equities, where dealing rooms in the city-state have recently had to cope with the arrival of a shorter settlement cycle in the US, the industry routinely takes a leisurely week or longer to move pension savings into mutual funds.
The Singaporean Approach
The Singaporean customers aren’t to be blamed for this sluggishness. They put in their buy orders for funds on a mobile app on an online platform, just like they would with a stock. But that click only begins a back-and-forth of faxes and e-mails between asset managers and their distributors, fund administrators, trustees, and registrars.
A Roadmap for Change
Unhappy with the status quo, the Monetary Authority of Singapore came up with a roadmap for transforming the island-nation’s financial services industry by 2025. A specific plan was to digitalize the infrastructure. Marketnode, a joint venture of the city’s stock exchange and Temasek Holdings, the investment firm behind US$288 billion of Singapore’s state assets, was given the job of operating the new highway on which money and fund units can move faster.
Fundnode’s Launch
Last quarter, Fundnode, the platform, went live for cash orders, reducing their settlement time to two business days after the transaction, or T+2 in industry parlance. Before the end of the year, the savings parked with Singapore’s state-run and privately operated pension programs will also be able to move in and out of mutual funds with equal ease.
The Experimentation with Efficiency
The experimentation with efficiency comes at a delicate time for Singapore’s reputation as a financial center. A record S$3 billion money-laundering scandal in which a group of criminals from China laundered proceeds from online gambling through at least 16 financial institutions has made both banks and authorities extra cautious about illicit flows.
Conclusion
Singapore’s stance towards cryptocurrencies has also tightened, especially when it comes to protecting the local retail investor. When Singapore hosts its Formula One night race on Sep 22, there will be no crypto advertising along the track. It was banned two years ago, shortly before the spectacular collapse of Sam Bankman-Fried’s FTX empire.
Frequently Asked Questions
Q: What is the purpose of the Fundnode platform?
A: The Fundnode platform is designed to digitalize the infrastructure of the financial services industry, reducing settlement time and increasing efficiency.
Q: How does the platform work?
A: The platform uses distributed ledgers and smart contracts to automate manual processes, bringing together scattered, unstructured data into a unified repository.
Q: What are the benefits of the platform?
A: The platform can reduce settlement time, increase efficiency, and cut counterparty risk from foreign-exchange trading.
Q: What is the potential for the platform?
A: The potential is vast, with the possibility of tokenization of financial and real-world assets by 2030, a US$4 trillion market.
