Deputy Prime Minister of Singapore: Is Web 3.0 good or bad? Warning to retail crypto investors

It is a pleasure to attend the second Asia Technology Singapore Summit (ATX) again. Last year’s first conference was completely virtual. So I'm glad we're doing it in a hybrid format this year. A very warm welcome to everyone.

Digital technology is changing the world, and the epidemic has accelerated the pace of change. Artificial intelligence and the Internet of Things are now more commonplace. More activities are taking place online. The digital economy is growing rapidly and there are even many untapped opportunities. But as the world becomes more networked, so do malicious actors and threats. Last year, cyberattacks on corporate networks increased by 50%, and ransomware attacks on governments increased by 20 times. The attacks on SolarWinds and ColonialPipeline are reminders that these threats can derail the digital economy if left unchecked.

A new wave of digital technology is emerging, called Web3.0.Metaverse, NFT, DeFi, and DAO. Are these good or bad?

At this critical moment , we gathered here from all over the world to hold talks.

In addition to the digital revolution, there are other structural shifts, including a greater emphasis on sustainability and the aging of populations in some parts of the world. There are multiple pressing challenges: learning to cope with COVID-19, managing the aftermath of the Russo-Ukrainian war, and mitigating global inflation and the risk of another global recession. Despite the distractions, we must continue to focus on building a better future for our people. In the context of the digital revolution, this means staying open to emerging disruptions, dealing with threats decisively, and taking advantage of existing opportunities.

Now I share my thoughts on how we can do this.

Be open to emerging disruptions

First, we must be open to emerging disruptions. Web 3.0 is still new and has not yet been fully defined. We've seen our fair share of passionate advocates and critical skeptics. Cryptoassets, in particular, have attracted significant interest. Earlier, it was due to its stunning growth and promise of higher returns, and more recently, it was due to the collapse of LUNA and the cryptocurrency’s plunge. The way to approach Web 3.0 is to keep an open mind. We must penetrate the veil of arrogance and skepticism to understand potentially transformative underlying technologies without simply beating them to death.

The underlying technology deserves further exploration.

Tokenization can fragment assets: this may enable greater liquidity, better price discovery, and access to illiquid assets.

Distributed ledger: No intermediaries are required, which can reduce costs, prevent data monopoly, and prevent rent-seeking behavior.

Allows simultaneous settlement: payment and delivery occur simultaneously, which can greatly reduce settlement risks between transaction parties.

The greatest potential for these new technologies may be in cross-border transactions. One example is the Dunbar Project, which brings together the BIS Innovation Center, Singapore and several other like-minded countries. The Dunbar Project explores how a single platform for multiple central bank digital currencies can enable cheaper, faster and more secure cross-border payments. The project has validated various design approaches through prototyping. It recently released recommendations that will support the G20’s roadmap to strengthen cross-border payments. One of the technical support platforms for the Dunbar project is Partior, a technology company established by DBS Bank, Temasek and JPMorgan Chase. Partior implements a blockchain-based real-time interbank clearing and settlement network using commercial bank digital currencies or wholesale CBDC.

The cryptoasset space is constantly evolving. We recognize this is a high-risk area, but it also has the potential to change the future of finance. We must continue to adapt our rules to ensure regulation remains conducive to innovation while addressing the key risks posed by crypto-assets.

The Monetary Authority of Singapore, or MAS, has been warning the public against cryptocurrency trading and earlier this year took steps to restrict the promotion of cryptocurrencies to the public. In the recent collapse of TerraUSD and Luna, many investors suffered losses and even lost their life savings, which triggered a ripple effect on Bitcoin and other cryptocurrencies.

Retail investors in particular should avoid cryptocurrencies. We cannot emphasize this enough. But the digital asset ecosystem includes entire services beyond cryptocurrency trading. We remain passionate about working with blockchain and digital asset players to encourage innovation and build trust in the space. Over the past two years, the Monetary Authority of Singapore has issued licenses and in-principle approvals to 11 digital payment token service providers. These include stablecoin players such as Paxos, cryptocurrency exchanges such as Coinhako, and traditional financial institutions such as DBSVickers. We will continue to evaluate applications and facilitate field experimentation through regulatory sandboxes for safe adoption in the financial sector.

The Monetary Authority of Singapore has also been working with the industry on a number of digital asset initiatives. I am delighted to launch ProjectGuardian, a collaborative effort by the Monetary Authority of Singapore to work with industry to explore the tokenization of financial assets and develop the financial infrastructure of the future. The first industry pilot will be to explore the potential application of DeFi in wholesale funding markets.

In short, we must approach emerging technologies with an open mind and separate arrogance from true potential. Through regulation, we work constructively to realize the benefits of these new technologies and work with responsible and innovative players with strong risk management capabilities to build the foundation of the digital asset ecosystem.

Be alert to growing threats

Second, let me continue by talking about how we deal with threats in the cyber domain. To harness the full potential of the cyber domain, we must protect against malicious activity, including cyberrobbery, data theft and cyberterrorism. The good news is that the global cyber response is ramping up. The annual growth rate of the global cybersecurity market is expected to exceed 14% in the next few years, faster than the growth of the digital economy. Countries around the world are developing cybersecurity strategies, introducing legislation, and building capabilities.

Singapore has done the same thing. We have made digital defense the sixth pillar of comprehensive defence, and updated the Singapore Cyber ??Security Strategy. We are also developing cybersecurity professionals to meet growing demand. At the same time, we are setting wider social standards for cybersecurity, urging companies to take strong measures to handle data, and increasing the cyber awareness of our people. But cyber threats, like most criminal activities, are ultimately a game of cat and mouse. We try to stay one step ahead of malicious actors, but these actors are trying to exploit new vulnerabilities. The cyber environment is also evolving rapidly, and quantum technology is a potential game changer. Strong encryption is key to digital network security. The current encryption standard, AES256, has been maintained because few people have the computing power to brute force the encryption.

But that may change with quantum computing. For some cryptographic functions, the fastest quantum computers are more than 150 million times faster than the fastest supercomputers. Quantum computers can solve problems in minutes that would take a supercomputer 10,000 years. This is one of the reasons why quantum technology has become the focus of global research. Quantum is also a key research area in our national R&D plan. Singapore's Center for Quantum Technologies, or CQT, is one of our country's centers of research excellence and the world's leading research institution in the field. Recently, we launched the Quantum Engineering Program (QEP) to apply quantum technologies to solve real-world needs and build quantum engineering capabilities and human capital. One of the latest initiatives under the Quantum Engineering Program is the National Quantum Secure Network, which seeks to deploy commercial quantum secure communications technology across our energy grid and other critical networks and for processing sensitive data, including data related to healthcare and finance.

Today let me announce two new projects under the Quantum Engineering Initiative.

1. The first project is the National Quantum Computing Center, which is composed of experts from CQT and other institutions in Singapore. This will allow us to further enhance talent development as this is a rapidly growing area and provide better access to quantum technologies.

2. The second project is the National Quantum Fabless Fab, which will support micro- and nanofabrication of quantum devices in partners’ clean rooms. Building on our strengths in advanced manufacturing, we seek to collaborate with industry to develop more quantum devices to solve real-world challenges.

Our investments in quantum computing and quantum engineering are part of our approach to trying to predict the future and proactively shape the future we want. The greater the potential of the cyber domain, the greater the cyber risks. Malicious actors will seek to profit by any means. Simply trying to stay one step ahead is not enough. If we do this, we tend to be one step behind, catching up and shutting down the last threats. To deal with them, we not only need to remain vigilant about current threats, we must also stay invested to stay ahead further ahead. In this way, we can create greater distance between key parts of the digital landscape and threat actors.

Cooperation releases potential

This brings me to the third point: Cooperation releases potential. Many countries have developed digital-first strategies with a strong emphasis on adoption, investment in innovation and closing the digital divide. Singapore is doing the same. We started the smart nation movement almost a decade ago. Digitalization and innovation are at the heart of our future economic strategy. We launched the Digital Life Movement to empower our people to embrace digitalization as a lifelong pursuit. We are actively helping small merchants and companies digitize payments and processes. These efforts can be more fruitful if we collaborate more broadly and more effectively. We are now enabling collaboration through platforms such as digital marketplaces and open innovation platforms that match real-world problems with innovative solutions. Collaboration on the Open Innovation Platform has increased since the COVID-19 pandemic, with the platform hosting more than 200 challenges since the outbreak. This kind of platform is a good start. But the matching of problems to potential solutions is often piecemeal. We need more proactive collaboration to better explore new opportunities, and stakeholders work together to build a digital commons so that everyone can get more back than they put in.

A good example is SGTraDex, a public-private partnership I launched at this summit last year. Even in the best of times, supply chains are not the most efficient. The current crisis has further exposed the fragility of supply chains. But no single company, no matter how well-positioned, can optimize its supply chain and build greater resilience on its own. SGTraDex is a unique data infrastructure for sharing regulatory, logistics and trade finance data. This will enable players along the supply chain to optimize cargo handling and operations and build confidence in trade finance. The more companies that join SGTraDex, the greater its value. From the beginning, we designed SGTraDex to be plug-and-play rather than a custom-built system.

Over the past year, we have piloted three use cases to test the value of SGTraDex. These pilot projects have been successful and have resulted in significant savings for current participants. I would like to thank all the companies and institutions involved in this work, including PSA International and Trafigura.

We have now entered the next phase of SGTraDex, with plans to expand this digital commons over the next few years. We will expand SGTraDex to include some more use cases, including green and sustainable trade finance. We will be looking to get more companies in the supply chain ecosystem to join SGTraDex. Over time, we hope to expand SGTraDex abroad and contribute to the optimization of foreign supply chains.

SGTraDex is an example of how we must invest in the digital commons to unlock new opportunities. We must design the digital commons to be inclusive from the start and make it easy for new participants to join.

We must also structure the digital commons in such a way that all participants have fair access to the value created. Only by working together can we transcend existing limitations and unlock new opportunities to improve everyone’s lives.

Summary

We are at a critical stage of global economic recovery as we emerge from the shadow of the COVID-19 epidemic but encounter new challenges. Structurally, technological advances, especially digitization, are reshaping the global economy. We must continue to focus on creating a better life for our people. I highlighted three ways in which we can do this.

1. It starts with keeping an open mind about emerging technologies and separating arrogance from true potential.

2. The second is to stay vigilant and invest in cybersecurity so that we can stay ahead of threats.

3. The third is to unlock new opportunities through cooperation and build an inclusive digital commons through cooperation.