Tuesday,21 May 2024

STACS’ Soh: “The regulated trading space and DeFi will converge down the road”

5 min read

Interviewed By Foo Boon Ping

Hashtacs (STACS) co-founder and managing director Benjamin Soh emphasised need for financial exchanges and markets to improve outdated operating models with an infrastructure that takes head-on the challenges posed by complex interdependent manual processing, and layered systems.

Improving an operating model that’s half-a-century old is a challenge, but this is the mission that fintech startup Hashstacs (STACS) has set for itself.

According to co-founder and managing director Benjamin Soh, STACS will do that by providing a processing infrastructure that would take head-on the challenges posed by interdependent manual processing, and multiple layers embedded in different systems that are still being used by the decades-old model utilised by financial institutions today.

STACS is focused on working on different projects with other clients to overcome some of the fragmentation issues involving distributed ledger technology (DLT), Soh pointed out.

In fact, the company just completed its ‘bond-in-a-box’ proof-of-concept on the use of DLT for digital assets and sustainability-linked bonds, in collaboration with Bursa Malaysia, Union Bank of the Philippines and UBS.

“We welcome more innovation in the sector. It’s going to be just synergistic to everyone,” noted Soh.


Here are the key points that were discussed during the interview:

The following is the edited transcript of the interview:

Foo Boon Ping (FBP): Welcome to another episode of TABLive. We are very happy to be speaking with Benjamin Soh. He is the co-founder and managing director of STACS, which is a Singapore-based fintech that looks at building blockchain-based infrastructure for financial markets. STACS was set up in 2019 and has been involved in a number of projects with a number of exchanges, including Bursa Malaysia, the Gibraltar Stock Exchange. It has been working with a number of banks, enabling them with blockchain-based platform for the issuance of digital bonds, as well as environmental, social, and corporate governance (ESG) and green finance bonds going forward.

Benjamin, it’s so good to have you. Give us an overview of STACS. We know you were set up and was introduced in 2019. You recently had your pre-Series A funding of about $3.6 million (SGD 5 million). Tell us in this space that you're operating in and in Singapore specifically, there's been a lot of action – Singapore Exchange (SGX) working with blockchain at Tomasek with the market note, building a digital bond issuing platform. More recently, even DBS introduced its digital chain and issued the first of its security token offering. Where do you exactly fit into this space? And what are the plans for STACS?

Benjamin Soh (BS): It’s a great pleasure to be here. You mentioned we’ve set up in 2019 and the intention or the thesis of what we were trying to solve back then was pretty clear because if you look at our team, we’re made up of a group of industry veterans. When I say industry, I talk about financial industry, specifically. So many of us have more than 21 years of experience in the capital markets and we were trying to provide a solution to a 50-year-old problem. Back then and even now, it hasn't changed. We saw that the capital market is operating in a model that's 50 years old, based on technology that's 50 years old, whereby we are still having a lot of interdependent manual processing, layers and layers of different systems embedded together, all entangled together. What we really want to do is to provide a solution, which is what we’ve set out to do, to provide an infrastructure, where now these financial institutions are able to derive certain efficiencies and also to enable them to look at certain opportunities.

I'm glad that you pointed out all these industry developments in recent months, because it only serves to validate the fact that our thesis wasn't wrong. Our thesis is accurate in the sense that many institutions have started to look at the use of such an enabling technology that will be able to bring about a new way of working in the financial sector. So we definitely welcome any of these developments because we see these as a highly synergistic. As a company, we are highly focused on providing the underlying technology that could be plugged in or interoperable with other exchanges, even if the other exchanges or other institutions, as you mentioned, could be using a different form of technology. That's really fine with us. Because ultimately, what we are building is an interoperable system.

We have already completed certain projects with our other clients. They have already overcome some of these fragmentation issues by having interoperability between our distributed ledger technology (DLT) platform and other DLT platform, even with our DLT platform and non-DLT platform. For us, we welcome more innovation in the sector. That's going to be just synergistic to everyone.

FBP: A recent initiative that you have completed is a proof of concept for ‘bond in a box’ with Deutsche Bank. The issuing bank was UnionBank and Deutsche Bank is the initiator. Tell us more about the project. In terms of digital bond issuance, it's not new. The first ever digital bond was introduced by the World Bank, way back in 2017-2018. There have been a number of banks, notably Banco Santander and I think BNP, that have gone into digital bonds. In Asia, I think Thailand and the Philippines, have also gone into digital bonds. Of course, in Singapore, you have SCX market note issuing together with HSBC. And there’s a sizable issuance, about 1 billion worth of bonds to a number of issuers. You are still working on a proof of concept. That's interesting because digital bonds have been already issued. What is STACS’ proof of concept hoping to achieve?

BS: We actually work with Deutsche Bank, Union Bank of the Philippines, UBS, Bursa Malaysia and therefore there's a wide variety of industry perspectives. While you mentioned the proof of concept, it is quite worthwhile to note that we push the boundaries of technological implementation. Because the problem when we looked at the ‘bond in a box’ project was we wanted to overcome certain fragmentation in the market. There have been various digital bond projects. Largely, these are still within a silo. And of course, rightly so, because these are what are called experimental projects. These are projects that were largely kept within a single, isolated ecosystem and therefore there's actually more fragmentation that's being created. There wasn't anything wrong with that because it was largely still experimental phase for many of these projects.

Unlocking new efficiencies

BS: So what we challenge ourselves with was to look into the interoperability of this ‘bond in a box’ platform with existing financial markets and infrastructure. So interoperability became very important. What type of payment methods are we going to use to service it? What type of information flow are we having between the carbon banking platforms and our DLT-based platform? When we call it ‘bond in a box’, it means that all the services that the market will require: issuance services, investor services, custody, asset servicing, all of these will be readily available within one single platform that dramatically shortens the time to market yet within the interoperability, as mentioned above, doesn't fragment the market.

Lastly, as we mentioned in the press release, we also started looking into the areas of how we could use the ‘bond in a box’ platform with their smart contracts to be able to apply a lens into the areas of ESG and sustainability-linked bonds, where we are able to see enabling technologies like smart contracts and management of use of process on the distributed ledger being able to be applied to enable better management of ESG financing. But in summary, there were a few different achievements that we had made that's beyond many of the projects before us.

FBP: You describe all those previous issuances as projects, as experiments? In that they create fragmentation, that they operate in a closed ecosystem. Now Project Benja, the ‘bond in a box’? How are you breaking down the silos and creating interoperability? And how soon can we see something more mainstream and a wider acceptance of digital bonds that include a wider ecosystem as you described?

BS: The previous issuances, because they were rather early earlier than us, although they were live, but they were also pilots. That's why you had a certain form of silo or sandbox-type of feel to it. For us, what we wanted to do in the interoperability is to connect different systems together. We were able to establish certain interoperability as execution in our project, which allows us to be able to connect different banks together. That's where we see the technology, being able to support a full life implementation of a bond and still being connected to existing infrastructure. So that will open the doors to multiple and different participants, so they do not need to even be on the blockchain if they are able to be integrated with us through artificial programming interface (APIs). That's what we see as the key to having a larger market size, a larger market pool, while not sacrificing the efficiencies of the DLT bond.

FBP: An important ingredient to this interoperability or wider acceptance of digital bond issuance is to get more of the arranger banks, more of the ecosystem players like the custodian, the payment agents to be on the platform. How is the industry moving towards that? You have exchanges like SGX moving into that, you have in Europe six securities also moving into that. How do you see that space evolving?

BS: I totally agree with you. We definitely need the arranger banks. These service providers, they actually bring a lot to the table. They bring a lot of clients, they bring a lot of experience and expertise, which is why we actually work with many of these banks. I'm happy to also share that many banks are definitely looking into this. I think it's not even a secret now.

We were able to see that multiple banks are looking into the use of DLT for better servicing and in general, this trend is moving ahead. There's not a threat about this disintermediation to them because they still add value to the entire process. I see them as a partner on this journey of implementing DLT, whereby there is a very good relationship between collaborative approach between the participants.

In our own project, we are able to see, for example, Bursa Malaysia, giving us perspectives from our exchange and central securities depositories (CSD), while whereas we have three very different banks: Deutsche, UBS and UnionBank. They are actually experts in their very diversified fields. They were also able to provide new expertise and perspective from their specialty. So that serves as a model where we could be able to bring forward from an industry-wide approach.

FBP: Obviously, you're a commercial organisation. In terms of working on this proof of concept project, experiment, how are you creating a scalable, sustainable business from this? At some point, you need this to scale up and take off?

BS: Yes, definitely. So this is not the only project that we're involved in. From our commercial company’s perspective, we are operating this as a technology platform software as a service. We’re putting the work first to develop a platform, to have the platform, to have a more complete infrastructure, APIs and funding interfaces. We realised that this has become a complete solution, and by our business model, we are operating as a software as a service. We are able to allow institutions to come apart in an easier fashion. And only when they are turning this on live, when they have live transactions, when they have pilots and are going further, the actual commercialisation of the entire product, we will be able to enjoy the recurring revenue from the transactional base pricing that we have.

FBP: Which is not yet, right? Unless it goes live and it's been commercialised. Give us some examples of some of these live projects.

Going live

BS: We do actually have a few live use cases already. So some of our clients and partners are really live. There have been some press releases even before on our other projects of our partners using our platform for other services also. The Gibraltar Stock Exchange has gone live already with our platform. Secondly, we had a press release with Eastspring Investments and BNP Paribas. So that's also a live implementation of the platform for post-trade operations processes.

So ‘bond in a box’ is definitely one part of what we do. ‘Bond in a box’ is also entering the ESG space because it helps to structure ESG bonds, sustainability bonds. On the other hand, we also have other various integrations. You mentioned about blue cell, so other integrations and partnerships with a few other firms who are providing their own technology services on top of our infrastructure. So we have IoT firms, you have data analytics firms, we have Big Four assurances. They're able to provide services on top of us, whereby they are the ones who are leveraging on a blockchain technology to provide a better service to their client. That's where there's a go-to-market strategy of bundling together with all these partners to give a proper, better overall solution.

FBP: Earlier we discussed about your pre-series A funding round of about $3.6 million (SGD 5 million). In the announcement, a big chunk of the proceeds will go into scaling up the business in terms of expanding the team, especially in this whole area of ESG and green finance. Tell us in terms of how big has the team grown at this point?

BS: Presently we have about 32 people right now. This time last year, we had 12-13 people. So we have grown almost three times already in a matter of a year. It's definitely a good growth. We have three or four more people joining just this month alone and we definitely need to continue growing because we have quite a huge pipeline of projects and implementations that are going on right now.

FBP: Are you planning further rounds of funding in terms of what is the angle for STACS? At this point, you have $3.6 million (SGD 5 million). In terms of your financials, how do you look? Have you been evaluated?

Further growth on ASEAN+3

BS: The good thing is that we are revenue generating since 2019. Our revenues doubled from 2019 to 2020. Revenue is on track, it’s growing. While we are still growing, therefore we will also require more funds and more partners. We expect to have a second fundraising round later this year not because we need the funds, but because we still have a very healthy runway right now. It’s more of the fact that we want to grow our scale. We want to bring more strategic partners on board. We want to be able to scale up to more regions. We are definitely targeting ASEAN+3, which is Southeast Asia and Greater China, Japan and Korea for further growth.

FBP: Now, you work with Bursa Malaysia, you work with the Gibraltar Stock Exchange, but what about closer to home, in Singapore? How are you working with SGX or Monetary Authority of Singapore (MAS)? In particular, there are a few high-profile projects, but in relation to Project Benja, you mentioned there can be integration with Project Ubin, the payment system. Tell us how is that proceeding?

BS: So ‘bond in a box’ is definitely a banking platform for arrangers, custodians, issuers, investors. Ultimately, we still need to connect to trading venues because these bonds need to be traded later after the issuance and investing. Therefore, we will definitely hope to be able to integrate this with multiple exchanges, including the SGX. You mentioned about the bond project of SGX. That's definitely something that we look forward to integrate. In our report, we wrote that this will be highly synergistic because we will be able to deliver a fully digital bond from our ‘bond in a box’, integrated with the SGX. So such integrations, it's not just SGX. It’ll be all over the region, as you mentioned, Southeast Asia, Greater China. And of course, not just Project Ubin but also newer, digital payments services like Libra, if they are going on live, they renamed to Diem. Even the JP Morgan and DBS joint venture Partior, when they are ready. These are just various options and various avenues for us to explore.

FBP: Which is an interesting part of covering this particular topic because a lot of the projects are really in the experimental stage. Kind of either proof of concept or in the late phases of rollout. From what you know, how long is it before a lot of these pilot trials and experiments actually lead to something?

No chance of any of these turning into white elephants? Because in the financial industry, there are many examples in the payments area.

BS: It's not that far away, definitely. We started in 2019 and back then, in the first year of our operation, many of these projects that you named, they were not even started yet. They were not even planned yet.

They all serve very specific pain points. That's why there is a very good chance of success with all of them. If we're talking about payments for Partior, it is very clearly defined. Digital payments for Singapore dollar, for example. If we talk about the SGX bond product, it is a bond platform that digitalises the entire go-to-market, which is of course very good. Then if we talk about us, there is a little bit about ESG covering up the end-to-end lifecycle of ESG, handling the processes, asset servicing of the bond, and of course, go-to-market by using smart contracts. So this is a very specific product whereby there is a clear need and there is a clear demand. There is a good chance for every one of us, at least.

It's been a few years since 2016 or 2017, where the first wave of blockchain hype came about. That's been a few years since then. The industry has had more than enough experiences and research to be able to pinpoint exactly the problems that we're solving. It’s clear by now, everybody realised that blockchain doesn't solve everything. In terms of frontend trading, we're never going to use the blockchain. It doesn't finance trading. In terms of what we call established processes, there are various technologies that are already more than capable of handling it. So it's really reached a point where we are able to pinpoint certain areas for the use of DLT efficiently.

FBP: So where are the areas? You mentioned that there are all these projects testing out different parts of application of DLT. You have excluded it for the frontend part so the workflow, the lifecycle management, the post-trade processing appears to be an area where in digital bond issuance there is application for DLT. But there are also other asset classes as well. Maybe they've got more complicated processing involved, funds, REITS, for example, those have got potential application for DLT. What is holding back some of these from going live? Is the technology not really fully mature? Or is it just getting everyone on the ecosystem to come together? Is it a more organisational issue? Or is it the technology issues? Or is it a matter of standards and having the proper legal framework? All are very entrenched issues to overcome?

BS: I do think that it’s definitely implementation. It’s definitely not legal or what we call regulatory. Because whatever we are doing today, it’s still a security. When tokenising a bond, for example, it’s still a bond. There’s still the Securities and Futures Act. But the fact is that we are not trying to change the way it operates. We're still working with intermediaries. We are not selling directly or breaking any selling rules. So that's the first principle, we are not really trying to change the way it's being marketed or sold. It's really more of a technological advancement of the way it is being operated. I do think it’s implementation. Everything about it is only from 2016-2017. It’s a period of less than five years when banks started to really do serious work on the DLT. So within five years, we've gone from various iterations. Some banks started building their own, some banks started buying, some banks started doing (proof-of-concept) PoCs and some banks started collaborating.

Through these five years, we are now reaching the point where many institutions have already started to find ways of implementing points of integration, of such technology with current processes. It was always never going to be an overnight thing. Overnight in a sense that it wasn't going to be somebody presenting a platform, deploying it, and then taking over all the processes natively. Because there is an existing infrastructure, existing registry existing depository, and of course, existing investors who are used to existing applications and platforms to take care of. I've always thought that it's always a matter of implementing it incrementally for financial services.

FBP: In this age of fintech and shortened time to market, people’s expectation is that this should happen sooner. But in terms of financial technology of the older data, all these thing takes a long time. The implementation of core banking system, for example, is a multi-year endeavour. Industry observers are saying they are expecting too much out of blockchain, that this is a technology that is ready to be implemented as soon as possible. In terms of the life cycles, so to speak, are we here on the uptake or is it going to reach some point of maturity soon?

BS: Definitely, it’s the way we want to implement it. So if we are expecting to deploy the blockchain and take over the entire banking system, that’s quite unrealistic. I do think that this partnership, whereby what we have done is that we are integrating blockchain to various integration points such that the frontend platform is still going to be the same. The backend, customer relationship management (CRM) system and servers are still going to be the US that belong to the institutions and it's just really finding some of the gaps in between to integrate. It should lessen the time to market because we are still using enterprise grade security, enterprise grade encryption and communication.

We are still using some of our projects, the existing frontend or backend of the financial institution. So it's more about connecting to the DLT platform to our blockchain, rather than the platform replacing everything. So that's where I hope will be the best way forward, whereby we are fitting our platform into certain various processes, finding multiple touchpoints to integrate and then following the enterprise grade standards. So that will lessen the time to market dramatically. In terms of the lifecycle, right now, we are at a point of increasing momentum, at least for STACS. We’re starting to see a lot more interest and demand from institutions to actually get integrations done.

FBP: Now, the fundamental question is also DLT and blockchain, how essential, how critical it is. You mentioned the 50-year old problem with the old way of processing securities: manual process, there are a lot of inaccuracy, rework. A lot of it is just manual and a lot of the processes are linear where the DLT adds value to the processes in terms of its characteristics, all smart contracts being immutable, being decentralised, and the ability to automate a lot of those decision points, for example, automating coupon payments and reconciliation that are in the old form, or traditional processes is manual, and time consuming. Is it a solution that only DLT can solve?

BS: DLT is an enabler. I don't think that nobody wanted to solve it in the last 50 years.  Definitely, there have been other very clever folks out there, but DLT is definitely an enabler. It doesn't solve everything. It doesn't solve liquidity issues, market access, but at the very least it allows digitalisation that could indirectly lead to that. But DLT we believe, distributed ledger, it does bring about benefits in the sense that we are now able to take existing trade data, existing products, as in data in general, find the common critical points, standardise them, put it onto the blockchain with smart contracts, committing automation to code and yet maintaining a source of truth. Now is the best time because now the industry is at a size that it's never been before, it's only growing, it's only reaching record highs in terms of the size.

In terms of opportunity costs, it's getting larger and larger. Because in terms of pressure, the market is only going to become more and more active and the regulatory pressure or the capital requirements is just only going to get higher. I do think that now is the best time to really have the financial industry, looking to how this DLT infrastructure could be able to resolve the problem.

FBP:  Getting into more technical discussion, the underlying blockchain technology that STACS uses, there's a lot of open source technology. Are there differences, let’s say for those that are not too technically inclined, are you creating your own blockchain technology? Are you using one of the current open source and are there differences or are all blockchain technology the same? Are they TESOL, Ethereum? Even to the artery core, at least the regulator's part of the industry is using it. Of course, decentralised finance (DeFi), there’s a whole lot of different open source there. Tell us in terms of the underlying technology itself, what are the differences? What are the strengths? Pros and cons?

BS: There are various numbers of blockchain technologies out there. So we are using enhanced version of the open source Ethereum blockchain. At our very core, we are using the standard Ethereum virtual machine (EVM). Our smart contracts are written in Solidity, which is the open source common language that the Ethereum blockchain uses, but because we are deploying our platform for financial services,  we had to make certain enhancements. Certain things that we have done, for example, we changed the consensus so that it's no longer a proof of work blockchain. It doesn't require mining, it doesn't require specific hardware.

We’re really no different from the enterprise script database that institutions are already running. So it doesn’t add carbon footprint. The way we implement it is in a permission manner. So it's not a public-public blockchain. It’s a permission global blockchain, as I like to call it because it's permission is only to the institutions that are allowed to use it and it's global because it serves everyone. Institutions are able to use it. Their clients are able to view the results. So it's not like a script blockchain. It’s just that it’s a permission for certain enterprises to be writing transactions.

FB: There is a cost of using Ethereum. There's no cost in terms of guests or the terms to use in the industry. How commercialisable is that?

BS: We changed that. We don't have guests because from the financial sector perspective, we need to not have guests. We can't have transactions where we don't know what is going to be the price. It’s a permission blockchain that doesn't have guests. So we definitely do not have a cryptocurrency for utility token of the blockchain.

FBP: How do you create interoperability when everyone is using a different technology, different standards? Who else is using Solidity among the market participants?

BS: So interestingly, we are a big fan of Ethereum because we are using a modified version of it. So as our Solidity smart contracts are being deployed, we can take in the existing Solidity smart contracts that have already been standardised.

There are quite a few users of Solidity. If you look at Qurom for example, it uses a private Ethereum, although they also enhanced it. Then ConsenSys is very active in both the public and private Ethereum space. It's a very healthy community of developers. For us, we are able to use Solidity ERC standards like 1400, 777, ERC 20 at the very least. So these are all standards that have already been built, audited, accepted by a global community and that helps with portability. If somebody is deploying a smart contract into STACS, they could also take out the smart contract and deploy into Ethereum, and vice versa. These are ways that we are able to keep connected to the global development. But of course, in terms of network permission, because of the nature of the products that we are supporting, there has to be permission.

FBP: There's a number of Europeans that are into the digital assets and they have created their own digital exchanges. In Singapore, we have DBS that has got its own digital exchange, DDX right now. They were set up to trade in a number of cryptocurrency in the beginning. They also issued their first security token offering, so additional assets that can be traded, they can be invested in and traded on their exchange. It is obviously a proprietary. How does that fit into the entire picture? Obviously, it provides investors another platform and another alternative to enter into this space?

BS: DBS exchange, as you correctly pointed out, is to provide an alternative venue for investors to enter alternative assets. The bond is probably just the first thing that they are going to do. I call it a pilot, if you ask me. That's great, of course, to have more venues, more exchanges where investors and issuers will be able to assess. Ultimately, it’s the beginning of a trend.

FBP: Do you see more commercial banks getting into this space, setting up their own digital exchange? This whole positioning of being a pioneer in this digital asset space.

BS: It depends on the appetite. So some banks might prefer to be a member or partner of many exchanges. Some banks will want to be an exchange, I guess it's really up to their commercial strategy. But in general, I'm sure there'll be more exchanges.

Whether banks will run their own exchange or join exchanges, it's really a matter of commercial strategy to each bank.

FBP: One of the areas that we want to discuss is also the regulated space and the DeFi space, the decentralised space. Do you straddle both areas? Or are you kind of focused mainly on the regulated space?

BS: We’re focused on regulated space for now. For technology's perspective, we can do anything. Of course, you can’t do everything together at the same time because of bandwidth issues. When I say for now, it’s because we really don't know what the future may bring. I'm pretty sure that there will be some type of confluence somewhere down the road. So there will be some business model maybe? It's not really going to be that DeFi as we know it today. It's definitely a little bit more decentralised than the traditional financial infrastructure. It could be also something related to a totally different asset class altogether, for example, carbon offsets, because it's a new asset class that is also tied to legacy. So these are various possibilities that may happen and when we say it may happen soon, I'm not really talking about within the next one or two years.

FBP: So you have alternate venues like a carbon exchange, that is operating in the carbon exchange space, using blockchain. DeFi was this area of providing financial inclusion serving the unbanked or serving those that does not want to get into the regulated space. But now, more and more DeFi players are looking to be more mainstream, looking to make themselves more appealing to institutions. In order to do that, they need to adopt certain regulated practices, having crypto custodian for example, just to give the players a peace of mind.

BS: You're right and in fact, that example you brought up, having custodians, it also opens up the access to large investors because large investors will want to have a custodian. These are your fund managers, for example. For DeFi or any product, not just DeFi, that lacks institutional traction, there needs to be ecosystem around it, not just truly decentralise.

FBP: How do you see that that coexisting? They are profiled side by side. Do you see an overlap? Do you see the regulated space and the DeFi space crossing?

Operating a hybrid model

BS: There will always be a pure, traditional finance, and there’s pure DeFi, and there will also be some form of a hybrid in between and I see all three coexisting at the same time. Because nobody is going to replace anyone, just because banks are huge, it doesn't mean that DeFi will go away. Just because DeFi is huge, it doesn't mean that banks are going away. This doesn't stop somebody from innovating and operating a hybrid model.

FBP: This is still an evolving space, this whole blockchain and digital assets, in terms of DeFi  there are vested interest in a lot of crypto assets. They're also getting into the tokenised space, getting more traditional assets to be tokenised and to be put on the DeFi exchanges so to speak. The same thing is happening on the regulated space but perhaps in terms of speed, DeFi is moving faster than the regulated space. DeFi is where they're already doing deals and a lot more.

BS: Naturally, DeFi will move faster here but again you know you mentioned before custodians, they will be serving a larger investor and if the larger investor wants to get involved in DeFi, there will be a requirement for custodians to get involved.

FBP: Then you have players like DBS that is leading the way, moving from mainstream into becoming a digital exchange. They have planned to provide crypto custodian services, effectively straddling both regulated and the Defi space. Obviously, there are more. On a recent interview, we have in  the US, Signature Bank. They provide an exchange, from crypto into Fiat. And you have Bracken and a whole lot of European players out of Switzerland and out of Lithuania straddling the space.

BS: These regulated institutions that are entering DeFi, they still have to know their customer, they are not there to do money laundering. In fact, they are there to have anti-money laundering and that's great because that brings more credibility to the asset class, in general.

FBP: Is it correct for me to say that a lot of digital applications of digital crypto assets, these are more established in the DeFi space, in the regulator space? The banks and the exchanges are taking a more cautious approach. There's been a lot of experiments, a lot of trials, a lot of pilots, proof of concept, but these haven't actually gone ahead.

BS: Naturally, the duties of a regulated financial institution is to ensure that things are done in the proper manner. They will have to overcome certain milestones first.

FBP: The technology is there, but in terms of having common standards, interoperability, as you mentioned, now getting more ecosystem, intermediary, if you describe them to be fractured, to have traction and then to have them start doing things on the platform on a larger scale. That's not immediate yet. A lot of these projects, from Ubin to Benja, the project that you're working on, these are still waiting for greater traction to go live or go mainstream.

The big bang

BS: But I wouldn't be surprised if it comes at a big bang. Because in the background, it's not even a secret. I saw many institutions that are looking into DLT or researching DLT or doing something with DLT.

FBP: But when do we expect this big bang to happen? What's your prediction within the next year? What will be driving it? Will it be ESG, green finance, green bond that is driving it?

BS: I can’t tell in the future but for sure, it's not that far away. Within the next 12 months, for sure.

FBP: So over the past week, MAS, on the back  of the fintech festival, has got this whole ESG framework that was announced. Do you think those will create impetus to drive what's happening on the DLT front? In terms of capital markets lining up for more sustainable, more green finance activities?

BS: Definitely, for sure, yes. If you noticed the announcement, every one of them talked about this being a conversation from a year ago. Which means that when I say a big bang is coming, there is actually a lot of background work that I know is happening in the background. When this background is advanced enough, developed enough, tested enough, it will come in a big bang of multiple institutions together at one go. That's more meaningful than let's just say we launch a live bond but only with one or two participants. That’s not meaningful enough. So it will be more meaningful if as an industry, with so many things are happening in the background, with testing various PoCs as you call them, these will come online because these are all on an integrated fashion. I do personally believe ESG is one of our key catalysts because climate change does have a timeline. The timeline is shrinking as we speak. Any way to improve the way of tracking these physical assets would be welcomed by the entire industry.

FBP: You see that happening? That big bang would start, emanate in Asia? In Singapore, specifically?

Give us a sense of the ecosystem here in Singapore or in the ASEAN+3? STACS is one market. I'm sure that there are many others. Who are some of your ecosystem partners?

BS: I hope so. I'm sure many different places have different projects going on at the same time.

If you look at the Singapore ecosystem, MAS has been very supportive. It's not just MAS. If you look at the entire government in general, Enterprise Singapore, EDB, and various other government agencies. So the entire Singapore ecosystem is rather supportive of technology, for MAS perspective, fintech. That's where there's a lot of confluence of factors, including emerging stronger together, digitalising various aspects of society. In Singapore, there are multiple projects going on, not just in blockchain, not just in financial services for blockchain, but also in industries like supply chain, trade, logistics, etc. And also not just blockchain, but with our partners in IoT data analytics, etc. So that will form a complete solution.

FBP: But the big bang in terms of capital market application where you will have this big takeoff in digital bonds or digital securities issuance. Asia could be one, Europe, Switzerland.

BS: It could happen concurrently, because many banks are doing many projects at the same time.

FBP: Are there other areas that is kind of on the horizon? That you see having a big impact on this area?

BS: In general, the ESG, sustainable development will be a very meaningful thing and highly impacted through the use of better technology. So not just blockchain but of course, general IoT. So there's something that we also look forward to contributing in our own way, whereby we provide the underlying infrastructure to allow various technologies to transcend different projects and use cases and also have a common nexus in providing the insights.

FBP: We are still at the start of the curve, so to speak. So there's a lot more that will develop and  I'm sure we will continue to have this conversation as we move towards the next milestone. And also it will mark your prediction, in terms of the big bang to happen within the next 12 months. We first heard it from Benjamin Soh of STACS. Thank you so much Benjamin.

BS: Thanks, Boon Ping. My pleasure.

Keywords: ESG, DLT, Bond-in-abox, API, CSD, Asean3, Project Benja, Project Ubin, Libra, Diem, Partior, CRM, Fintech, Solidity, Ethereum, DeFi, Cryptocurrencies, Tesol, Decentralised Finance
Institutions: STACS, Bursa Malaysia, Gibraltar Stock Exchange, SGX, DBS, Deutsche Bank, UnionBank, World Bank, Bank Santander, BNP Paribas, HSBC, MAS, JP Morgan, Enterprise Singapore, EDB
People : Benjamin Soh, Foo Boon Ping
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