From November 15th to 17th, the 2023 Singapore FinTech Festival (hereinafter referred to as SFF) was held at the Singapore Convention and Exhibition Center (Singapore Expo) near Changi Airport. I was invited by the Monetary Authority of Singapore to personally participate in the world's largest financial technology exhibition for the first time.
It is no exaggeration to say that SFF is the world’s largest financial technology exhibition. This conference was first held in 2016 and was personally hosted by the Monetary Authority of Singapore, the central bank of Singapore. By 2019, SFF has become the world’s number one financial technology exhibition with 60,000 attendees. This year's SFF is the first SFF after the epidemic has completely ended. It is an unprecedented event, attracting more than 66,000 participants from more than 150 countries and regions around the world. The numbers are impressive (see Figure 1), but It's very abstract, and people experience it more profoundly on site. The entire conference adopts the integration of exhibition and venue, occupying six huge exhibition halls, each of which can hold a separate conference for thousands of people. SFF has opened up these six exhibition halls, accommodating more than 60,000 people, more than a dozen forums, and nearly a thousand curators' booths. Almost all companies and international institutions that have anything to do with financial technology are afraid of being absent. In addition, catering, With all the basic facilities such as reception points and service areas available, it is simply a prosperous small town. Even with such a large scale, for three full days, there were huge crowds of people, and this did not include the dozens of peripheral meetings that took place during SFF. You can imagine the grand occasion.
Because SFF has such a scale, internationality and inclusiveness, if you want to understand the current basic situation and development trends of global financial technology, SFF is a good opportunity to get a glimpse of it. There are many domestic financial technology experts attending the conference this time. It would be a great benefit if someone could give a comprehensive introduction. Unfortunately, I only focus on the blockchain and Web3 fields, so I am not capable of making a panoramic introduction. I can only conduct some discussions based on my own professional field. The point is not to introduce the status of the meeting, but to think about some issues that concern you based on what you saw and heard at the meeting. Of course, I also unbiasedly believe that, judging from the situation of SFF, Web3 is a key trend in current financial technology innovation.
Figure 1. Transcript of SFF 2023
1. The theme of financial technology innovation is the comprehensive deepening of digitalization
2023 is the year of artificial intelligence, and SFF cannot avoid making artificial intelligence the main topic of this conference. However, when you actually arrive at the venue and watch it once, you will realize that, at least at this moment, artificial intelligence is still a big deal for financial technology, with mainly gimmick elements. The real protagonist is still "digital".
When it comes to financial digitization, domestic readers are not only familiar with it, but they may also have a "far ahead" mentality. I communicated with some financial technology experts from China at the venue and learned that the current domestic attitude towards financial technology is retreating to the conservative side. I suspect that this is partly because the long-standing real estate barrier lake has squeezed the focus of China’s finance on “risk prevention” and has no time to take into account financial technology innovation. On the other hand, it may also be due to pride and complacency. Throughout the 2010s, relying on the rapid development of mobile Internet, China led the world in digital financial technology led by two major mobile payment systems. Many things that China did six, seven years ago or even ten years ago are still being done by most countries. No, so many people have the arrogance of "if I sit down and let you chase me, you won't be able to catch up".
But judging from the situation at this SFF, I'm afraid this arrogance no longer has much capital. Looking at the agenda of this conference, it is definitely a major theme for different countries, regions, and transnational organizations to discuss the establishment of cross-regional digital financial infrastructure, especially represented by the advocacy of the conference organizer MAS.
As the monetary and financial regulatory authority of Singapore, MAS proposed the "five anchors" of digital financial technology a year ago, which areinstant transfer, atomic clearing and settlement, and Programmed currency, asset tokenization, andtrusted ESG data. This year, MAS has proposed three major goals based on these five points, namely:
Instant Payments: Make efficient, low-cost cross-border payments around the world.
Seamless financial transactions: Through digital currency, asset digitization and digital trading networks, seamless transactions of financial assets between different trading venues are achieved.
Trusted sustainable ecology: Create a credible data and disclosure ecology to support the sustainable development of financial and environmental ecology.
This year's three major goals and last year's five anchors are not substitutes, but a complete system of strategic goals and strategic means. The means are easier to understand. How to understand these three goals?
We can look at it this way: If the financial industry is regarded as a real economy, there are also three flows in the industry: logistics, information flow and money flow. The special thing about the financial industry is that logistics in it mainly involves the transfer of financial assets, and financial assets are essentially financial rights and interests, which are virtual rather than physical. Therefore, people say that finance is a "virtual economy". MAS has made it clear that it is a strategic goal to digitize all third-tier players in the financial industry. It not only digitizes payments, but also digitizes financial assets and relevant information surrounding financial asset transactions. And the five anchors are the key means.
Among the three, the digitization of money flows is relatively easy, and China has taken the lead in realizing it in the domestic market. However, there are still many problems to be solved for the complete digitization of cross-border payment flows. When it comes to the digitization of assets, it is a huge topic that is still in its very early stages. As for the digitization of information flow, it seems not to be a problem at first glance. Aren’t all kinds of documents now digital? But this strategy also grasps the key: the key is not the digitization of forms, but "credibility and disclosure." Because information must be true, credible and properly disclosed in the right way and within the right scope to support the digitization of assets and transactions. What information must be true and credible and must be disclosed? The scope cannot always be unlimited. Combined with the formulation of the "five anchors", we can realize that in addition to information such as description information and transaction information of the asset itself, ESG data involving business entities is also indispensable.
Although SFF has many participants and diverse topics, the "real-time payment, asset digitization, and data credibility" proposed by MAS has a clear idea, can be roughly outlined, and can represent the main consensus of the meeting. The essence of this "5+3" program is the comprehensive and in-depth digitalization of financial technology. It has indeed grasped the gist of digital financial technology, and it does not point to a small domestic industry upgrade. , but a technological revolution intended to sweep the entire financial industry.
2. Digital innovation in financial technology will undergo “fission”
It is relatively easy to set a program, but much more difficult to implement it. The problem in Singapore is that it does not have a vast domestic market to rely on. All strategies require cross-border cooperation as soon as they are implemented. Even if they have great ambitions, they have to be negotiated on a case-by-case basis. In this regard, they are different from super-large economies like China and the United States. . However, financial technology innovation based on this "decentralized collaboration" will also have its own characteristics.
Judging from this SFF, the cooperation to promote digital financial infrastructure is not a unilateral wishful thinking, but the consensus of many countries and multinational organizations in the world. Through this meeting, not only MAS took the lead in signing a series of cross-border cooperation agreements, but many organizations participating in the meeting also actively communicated and coordinated with each other, and the intention to cooperate was very strong. This means that this round of financial technology upgrades will most likely be carried out and promoted through cooperation between small and medium-sized economies and international organizations. It is a decentralized development model. Although the financial industry leaders from various countries at the SFF conference spoke eloquently and the participants had lively exchanges with each other, I do not want to exaggerate here and say that this round of financial technology changes will be rapid and rapid. On the contrary, I believe that the implementation model of decentralized collaboration will lead to market fragmentation of this financial technology innovation, slower progress, and no giant-like winner will emerge soon. But at the same time, precisely because there is a lack of giants in the market that can quickly dominate the world with their market size and capital scale, free competition will last for a longer period of time, and their technology and product ecology will be extremely rich and diversified. The complex derivation and fission may become the financial technology innovation with the broadest geographical coverage, the most diverse forms, the fullest competition, and the most intense innovation in the technical field to date.
There is no successful precedent in world history to promote international technological change through decentralized collaboration. Prior to this, whether it was mechanization, electrification, the Internet, or mobile networks, their technologies and operating systems were first incubated and incubated by a powerful country in the domestic market. Under the circumstances, through some kind of international cooperation mechanism, they were able to develop to Global expansion and becoming the de facto standard. But at this moment, the only two major countries that have the ability to lead the development of a new generation of digital financial technology have adopted a negative and ambiguous attitude on this matter for different reasons. In the United States, the selfishness of maintaining its financial hegemony is too strong. It is unclear whether this new financial technology revolution, which features distribution, interoperability, trusted data, and inclusiveness, will impact the U.S. dollar and its own center of the global financial market. and the dominance of the global credit rating center, it is difficult to form conclusions and system designs for a while. In addition, the PTSD caused by the FTX incident has not yet recovered, so I would rather bury my head in the kaleidoscope of artificial intelligence and pretend that nothing is happening and the world is peaceful. In China, under the overall situation of resolving financial risks and maintaining stability, the problems caused by the rapid development of financial technology are still fresh in the memory. Once bitten by a snake, it has not been forgotten for ten years, and it is no longer willing to New financial technology innovations have been incubated in the domestic market at the expense of local shocks.
In the absence of two major countries, this round of digital financial technology revolution can only be completed through transnational and decentralized collaboration. For example, in the Project DESFT project that I personally participated in, the project initiators were Singapore's MAS and the Bank of Ghana. The Bank of Ghana provided application scenarios and experimental sandboxes, and MAS and the United Nations Development Program (UNDP) provided the core digital certificate standards. UTC, jointly designed and developed by Solv and zCloak Network. This is a typical decentralized collaborative innovation. As far as I know, this model is by no means an isolated case, but a very common form in current financial technology innovation.
Why does this kind of decentralized collaborative innovation work? I think there are four conditions:
First, there is a sincere, solid and urgent need. This demand comes not only from more developed economies such as Singapore and Japan, but also especially from developing economies. As early as June this year, when I went to Rwanda, Africa to participate in the "Inclusive Fintech Forum", I discovered that developing countries in Africa, Southeast Asia and other regions have a sincere and urgent attitude towards this fintech revolution. My interpretation of this is that many backward countries are very dissatisfied with the financial order arrangements in today's world and have been suffering for a long time. They regard this round of financial technology revolution as an opportunity for adjustment, hoping to improve the operating efficiency of their own financial systems. It can also occupy a more favorable position in the future international financial order by taking the first step. This mentality makes them generally more radical, less burdened by history, and more daring to try and make mistakes than developed countries in adopting advanced financial technologies. Although they lack funds, they are willing to provide resources that are more important than funds: application scenarios. This provides a breeding ground for innovation.
Second, the large-scale diffusion of financial technology knowledge has laid a new foundation for communication. In the past few years, especially the rise of digital currency, blockchain and DeFi, knowledge about monetary economics and financial technology has spread on an unprecedented scale. Before 2018, even within the technical community and even the digital currency community, few people could accurately understand the basic concepts of M0, M2, partial preparation, leverage, netting, atomic settlement, KYC, and AML. At this SFF, people from different countries have naturally used very advanced terms such as DLT, AMM, smart contracts, and tokenization to communicate. In a communication event at this conference, I explained the concepts of "semi-fungible tokens" and programmable digital tickets to more than 200 audience members. Even though it was such a cutting-edge topic, not only did most of the audience nod their heads to show their understanding, but many people rushed to our booth immediately after the meeting to talk to me about the application prospects of this technology. It is on the basis of this large-scale diffusion of knowledge that people from different countries, regions and institutional backgrounds can build trust with each other and jointly promote innovation.
Third, the existence of the Crypto sandbox. The Crypto world, led by the Bitcoin and Ethereum ecology, is often regarded by many mainstream people as a dark gray industry that is speculative and speculative and harbors evil and evil. But in fact, the existence of this space provides an unprecedented, unparalleled and irreplaceable innovation sandbox for the new generation of financial technology innovation. This innovation sandbox is large-scale, high-efficiency, low-friction, fast iteration speed, timely market feedback, and closed-loop technical and economic logic. It is impossible for any government or country in the world to take the initiative to create such a high-quality innovation sandbox, but today’s financial technology innovators have it at their fingertips. Due to the existence of such a sandbox, many concepts, technologies, ideas and even products and solutions can be verified in the sandbox in a short period of time. Nothing builds consensus like a working system. During the development process of Project DESFT, we followed this idea. We first created a living and usable display system on the public chain, which was recognized by the central banks of the two countries, and then developed in depth to support the real environment. business and innovation.
Fourth, the composability and ultra-high development efficiency brought about by the "fat protocol" characteristics of the new generation of financial technology and the open source culture. Many Web3 developers have noticed an interesting phenomenon, that is, the efficiency of developing systems based on the Web3 technology stack is about an order of magnitude higher than that of Web2 systems of the same level. An innovative and functionally complex DeFi protocol has only a dozen or even a few core developers behind it. This situation can be said to be a common norm. On the one hand, this is certainly because the current Web3 financial technology system is generally relatively simple and not complex enough, but on the other hand, it is also because new generation financial technologies such as blockchain, VC/DID, and zero-knowledge proofs have "fat protocols" Features, that is, the integration of super composability and a large number of functions at the protocol layer, making the development of application systems a breeze. Available systems built with thousands or even hundreds of lines of smart contract code abound. This ultra-high development efficiency, coupled with the established open source culture, has significantly reduced the capital and time costs of innovation, significantly accelerated the iteration frequency, and significantly increased the cost-effectiveness of innovation.
Because of the above four reasons, I believe that although there is no successful precedent for this technological innovation practice of distributed collaboration, there is indeed a possibility of success. Not only that, because innovation unfolds in a decentralized manner, compounded by different themes, different scenarios, different constraints and different technical ideas, and then combined in complex ways, it is bound to produce a very open and rich Through fission, all kinds of new ideas and new ideas will emerge in large numbers, bearing all kinds of strange flowers and fruits. Most of them may be short-lived, but great innovations will definitely emerge.
Of course, from a commercial perspective, since decentralized collaboration will inevitably consume a lot of time for communication, negotiation, and coordination, the agreements that have been negotiated may also be repeated, and the market will be divided into many fragments, so progress will not be fast. Nor will there be a giant winner that will dominate the world anytime soon. This is the main drawback of distributed collaborative innovation.
However, sufficient successful examples will help the gradual formation of a large market. In particular, I do not think that unified large economies such as China and the United States will remain outside this financial technology innovation for a long time. As mentioned before, the current indifferent attitude of the two countries towards financial technology innovation is largely due to cognitive problems and the current domestic situation. As time passes and policy ideas are adjusted, these two super-large economies with huge unified domestic markets will definitely still embrace this technological change. Among them, due to the flexibility of its institutional system, the United States may pass a bill similar to the "Token Safe Harbor" to institutionalize crypto, a ready-made innovation sandbox, into its own system, thereby picking peaches for later development. Come first. As China's domestic financial reform orientation is relatively far away from the general direction of this financial technology revolution, it is difficult to adopt a strategy similar to that of the United States. As for what kind of strategies it can adopt, that is beyond my cognitive ability.
3. “Digital autonomy” drives fintech’s shift to Web3
At SFF, fintech practitioners from various countries and regions fully reflected the diversity of ideas. Some firmly embraced blockchain, while others believed that the interoperability of centralized systems should be strengthened; some believed that they should go digital. Currency is used to solve the problem of instant payment. Some think that the existing payment system is very good and there is no need to go to war to shake the currency form; some think that the tokenization of real-world assets is the only way, and some think that it is a mirror image. Various different viewpoints collide, and it is difficult to say that a broad consensus can be reached on what we want in the future.
But almost everyone can reach a consensus on what they don’t want: they absolutely don’t want to be controlled or have their autonomy usurped by financial technology. And this consensus will undoubtedly push the development of the entire financial technology to the track of Web3.
At the SFF venue, I communicated with at least dozens of fintech professionals in various roles from different countries. When talking about their views on the future of fintech, the vast majority said that the next generation of fintech is absolutely unacceptable. Financial infrastructure is still like today, with a centralized platform hosting users' identities, accounts, social relationships, assets and data.
Please note that this is not a unilateral attitude. For example, although small and medium-sized enterprises have a clear attitude towards this, the regulatory authorities remain vague and ambiguous. This is not the case. The reality is that this view is strongly expressed by all different parties, from representatives of small and medium-sized enterprises to representatives of traditional financial institutions, from academic experts to regulatory officials.
why? I think it is caused by the autophagy produced by the current mainstream financial technology in the process of success. In other words, the more successful fintech in the Web2 era becomes, the more it creates its own gravediggers.
The Internet platform in the Web2 era is largely based on the setting of centralized technical infrastructure. By imposing unreasonable transaction structures and taking possession of users’ identities, accounts, social relationships, etc. in the name of custody, The content, data and assets are all owned by oneself, life and death are honored and dishonored, everything is taken and taken away, and absolute dictatorship is implemented.
The original intention of Web2 is that users create content and data, and the platform only provides technical infrastructure. However, twenty years ago, at the beginning of the rise of Web2, users only wanted convenience and pleasure, and had no concept of digital autonomy, and they had no more choices. The big platforms took advantage of the situation and took advantage of it, collecting all the key rights and This power structure is solidified, allowing users to turn their creativity and productivity into rich ores that they can mine at will, constantly grabbing resources and value from them, and becoming the overlord of the digital economy.
But the paradox is that the more successful such a centralized platform is, the more it educates everyone to oppose itself. Ten years ago, the concept of big data became popular, and people gradually realized that data is not only an asset, but also the most valuable asset. The value of Web2 companies actually lies in user data. How do Web2 companies boast about their power? Isn’t it just that we have a lot of users (accounts), a lot of user data, and a lot of user assets? The more they promote this, the more they tell everyone that I am powerful because I possess your value.
This is by no means just a psychological feeling, but is directly implemented in real user experience. Nowadays, it is true that more and more people have directly experienced the feeling of losing their autonomy. Although they are still unable to do anything about the current situation, many people are cautious, prone to blame, and full of grievances and complaints. Every time the platform manipulates traffic, deletes posts, and bans accounts, it is destroying Web2’s character and tightening the noose.
Thanks to the ten years of big data value training that Internet giants have spared no effort in, now everyone from the government to enterprises has fully realized the value of data and is very dissatisfied with the data value transaction structure established by the centralized platform. Ask the governments of developing countries, who can still accept the payment and financial data of their country being managed by foreign Internet giants? Ask the companies, as long as they have a little scale and a sense of data autonomy, which company is still willing to hand over data to a centralized platform and let it take it? In the past year, I have communicated with government officials and small and medium-sized enterprises in many countries, and I deeply feel that their requirements for autonomous identities, autonomous data, autonomous social relationships, autonomous assets, and autonomous rights and interests have fully awakened. This trend is irreversible. Within a few years, It will surely become the consensus of all types of users.
People's mentality has changed and their ideas have changed. Once this change is initiated, there is no turning back. This is the key concept driving this round of financial technology innovation.
The emergence of Web3 provides people with new choices. The only keyword for Web3 is "autonomy", not anything else. Its connotation includes autonomous identity, autonomous accounts, autonomous social relationships, autonomous content, autonomous data, autonomous assets, etc. These are not empty concepts, but a new set of digital economic rights structures and transaction structures. They are a new set of orders and processes that directly affect the way users use the Internet and financial technology products. Driven by such a concept, financial technology innovation will inevitably be directed towards Web3, and there will be no other direction. Within a few years, users will first experience the taste of Web3 digital autonomy through some fintech products, and then they will not be willing to go back to the Web2 world even if they are whipped with a whip.
(The next part of this article will discuss the status and changes of blockchain in this financial technology innovation)