The Monetary Authority of Singapore (MAS), Singapore’s financial regulator, has promised S$42 million (US$31.6 million) to modernize the country’s economic digital infrastructure. The new Regulatory Technology (RegTech) grant program, which offers grants to both new entrants to the industry and more mature companies looking to implement modern RegTech solutions on a broader scale, will be a part of this.
Although the grants program does not expressly mention digital assets or cryptocurrency firms, several industry figures have praised the news. It is critical to develop and integrate RegTech into the digital asset environment in order for them to achieve broader adoption in the financial community.
The latest grant schemes also include a S$30 million “Digital Acceleration Grant” for smaller financial institutions in Singapore (with less than 200 employees) to help them build resources to address the problems posed by the COVID-19 pandemic and its consequences. Tangential technologies, such as cloud and data mining and productivity software, will be examples of these methods.
The new grants scheme’s emphasis on pilot projects was a key feature, as it would provide new developers with additional funds to create systems that would otherwise not exist if they were to design them for free and in their spare time
Sopnendu Mohanty, MAS’s Chief Fintech Officer, said announcing the grants that it was difficult for emerging RegTech solution providers to build systems without financing. More developed financial institutions had fewer resources to commit to modernizing their regulatory enforcement functions.
At the end of March 2021, MAS submitted 1,100 applications for the latest grants.
According to Ian Lee, VP of Business Development at blockchain research firm Merkle Science, the step is “optimistic for fintech innovation in Singapore and demonstrates the MAS’s aim of Singapore being the Smart. Financial Centre of the World.” He referred to it as “another stake in the dirt” for the MAS in terms of allowing blockchain firms to continue expanding the limits of creativity.
“Arguably, one of the biggest hurdles toward the legitimisation of digital assets is abusive and illicit behavior—both real and perceived—within the industry that governmental bodies around the world are struggling to navigate and manage. Having robust RegTech that keeps in pace with fast-changing technologies—such as blockchain and cryptocurrencies—is necessary to create a safe environment for innovation and ensure the healthy growth of the industry.”
Although the MAS’s latest RegTech grant isn’t explicitly aimed at the digital asset market, Lee believes it would have a significant impact. RegTech would support blockchain’s integration into the wider financial world. Furthermore, under the new PSA licensing scheme, digital asset exchanges and other service providers that obtain a license would be designated as financial institutions, making them eligible for this award.
RegTech is a comparatively young field within FinTech. As a result, it has failed to innovate new solutions—and then persuade more prominent financial institutions to invest capital in improving and implementing its innovations.
The challenges that these startups face, according to Lee, are as follows:
“RegTech solutions are having a difficult time gaining market share here in Singapore and abroad. Oftentimes, startups at their initial stages have to give away their solutions at a low cost—or sometimes even for free—in order to gain traction and receive feedback on their product. With startups’ limited resources, it is difficult for these innovative new startups to compete with larger legacy firms.”
He went on to say that the MAS is helping local RegTech startups grow and fostering creativity in two ways.
“Firstly, the grant furthers the existing Digital Acceleration Grant (DAG) scheme, which is available to any startup that services financial institutions. Through the extension of the DAG, financial institutions can also use the grant to subsidize their cost of operation.”
“The second, perhaps more interesting feature of this new grant is for RegTech providers to pilot their solutions and test for efficacy under a paid model. While the details on this feature have not been released yet, it sounds like there may be subsidies for established companies to use and test the solution before the startup moves the solution to full-scale production.”