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What makes Singapore a leading crypto hub of Southeast Asia? | Singapore Central Bank CFTO explains - YouTube
Channel: Cointelegraph
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This is Singapore, the largest fintech hub
in Southeast Asia. With a population of less
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than six million people, the small city state
is the base of around 40 percent of fintech
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companies in the ASEAN region.
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Here, we don't see the difference between
fintech and banks. Both are complementary,
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they come together. They work together.
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This is Sopnendu Mohanty, chief fintech officer
at Singapore's Central Bank and Financial
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Regulator, Monetary Authority of Singapore.
In anticipation of this year's Singapore fintech
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festival Blockshow collaboration, we discuss
Singapore's unique approach to crypto and
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blockchain. I'm Giovanni, your host.
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Welcome to another Cointelegraph interview.
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How are you, Sopnendu? I'm extremely fine,
good time.
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We saw that other Asian countries like China
and South Korea have been adopting quite a
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tough stance on cryptocurrency lately. On
the other hand, Singapore has adopted a very
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different approach, which is much more friendly.
So why has Singapore decided to adopt this
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approach?
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Look, the word friendly could be highly misleading.
We are friendly to everything in life, to
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good ideas, good, good people, talent, good
purpose. So being friendly to crypto doesn't
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mean that we're adopting crypto. Because different
jurisdictions face their own issues and concerns.
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Some have currency challenges that they're
worried about that will circumvent the controls.
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We see benefit through the lens of innovation.
And outright banning cryptocurrency doesn't
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really help to understand the risk and what
it comes to, what comes with the crypto. So
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allowing crypto to be an experimental construct
in Singapore is what we are looking at. Of
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course, we are worried about money laundering
and we have very strong policies in place
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to manage a guard against money laundering
and terrorism financing. And more importantly,
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we have a very, very thoughtful, expanded
Payment Service Act, which today governs the
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crypto exchanges and other places that are
dealing with payment tokens. So we have regulations
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in place. We have safeguards in place. We
have advisories in place. We constantly advise
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people the risk of cryptos, but we don't stop
if there are experiments which is going on
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crypto, which can lead to something good,
but that's to be, to be looked at. And we
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hope that that's the outcome comes out of
this whole crypto exercise.
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The head of the MAS, Ravi Menon, last year
said that Singapore does not regulate the
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technology, it regulates the use cases. So
can you comment on this quote, explaining
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what the head of MAS meant.
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What Ravi really meant was technology itself
is neutral.
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It is the business activity that poses risk.
So we applied the regulations accordingly.
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We operate on the principles of same businesses,
same risk, same rules. One example, we are
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a guide to digital token offering. We have
clearly laid out examples of different use
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cases, the type of business activity they
are engaging in and the regulations applicable
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to the business activity. Now you have to
expand and extend that, what we spoke about.
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The end of the technology is to enable something.
We look at that something whether that something
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has got the right outcome and that right,
and that process of getting that outcome,
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does it create risk? If there are risks, we
think about regulations which can help to
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offset that risk. So the technology itself
is an enabler, not the product itself.
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So for the past four years, the MAS has been
experimenting with blockchain technology within
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the framework of Project Ubin. So Project
Ubin reached the phase five this year in the
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summer, and it developed multi-currency payment
network, in collaboration with JP Morgan and
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Temasek. Can you give us a little bit more
details regarding what this phase five of
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Project Ubin means?
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This platform gives you the ability to transact
with each other on the network digitally and
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directly in different currencies, which previously
you were able to do only in Singapore dollar.
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Now, this brings a wide range of benefits,
especially when you have, when you have to
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do payments in multiple currencies. This can
be much cheaper, faster around the clock.
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A more liquid FX market could result in better
FX rate discovery, and the settlement of foreign
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currency denominated securities become far
more simpler.
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In phase 5, we tested out the integration
with other blockchain-based platforms to enable
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end-to-end communication across many industries
and use cases, which runs on top of this multi-currency
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network.
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And this were live technical integration with
transactions happening across the payment
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networks, the different networks. Some of
the use cases we tested where, for example,
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a delivery versus payment for settlement with
assets on private exchanges. Very, very pertinent
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to this particular use case, sometimes use
cases on conditional payments and escrow,
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finance networks, payment and integration
with healthcare claims. Again, this is a perfect
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example where you need to have blockchain-based
network based on a smart contract to trigger
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a healthcare claim. And it could be multi-currency.
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Ok, so maybe you can explain to our viewers
why blockchain technology is so important
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and fundamental for the functioning of this
multi-currency payment network?
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In this world of complex processes, we always
look at processes as a different stream of
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activity. And having a blockchain with a distributed
ledger simplifies the process of checking
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against each other. So having a distributed
ledger by design takes away the whole complexity
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behind of settling things, checking things.
And it allows some of the business rules to
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be built into the use cases so that the payment
process and the settlement process, the underlying
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business rule can be encoded to a single stream.
Today in the current world, there are two
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different processes. There's a process where
you pay each other and there's a process which
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we exchange goods and services. They're two
different processes. Blockchain digital currency
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brings together these two processes to a single
process. In a single process, you're not only
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paying each other, but also ensuring the goods
and services are also exchanged at the point
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of payment.
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Now, I would like to talk about the CBDCs
or central bank digital currencies, which
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is one of the hottest topics at the moment.
What is the stance of the monetary authority
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of Singapore towards the CBDCs? Are you planning
to develop your own digital currency soon?
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I think when people talk about CBDC, they
implicitly think about a retail CBDC or a
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non-wholesale CBDC. We have been in particular,
very, very focused on one part of CBDC that
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is the wholesale CBDC. In fact, I'd argue
that we are the first central bank globally
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to actually pick up the wholesale part of
CBDC and run with multiple experiment. And
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there's the reason behind why we did this,
because we are a small country.
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Our existing payment system has the most optimal
infrastructure. I can move money from, from
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my account to my colleague account Jaclyn's
account in three clicks, money with zero cost.
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So there's no real driver behind retail CBDC.
What really we are looking for is a wholesale
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CBDC, because wholesale CBDC brings a significant
efficiency optimization in this whole process.
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And that's the reason we have been very, very
vocal and very, very focused on the wholesale
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CBDC. In fact, I made a statement, I don't
think we should do any more experiment in
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the wholesale CBDC. We have done enough experiments.
We should not think about going into production
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and get it implemented and take the benefit
of all the good work done on the wholesale
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space globally.
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And this is MAS example, but I have exactly
the opposite example for you. Let's take the
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example of Cambodia and the example I would
like to bring in is the Cambodia's Bakong
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project.
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And today, if you go to their website, you
will see it says the Bakong project is actually
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a real-time growth payment system. It's actually
a payment system which runs on a retail CBDC.
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And what it says, it says that you can move
money and with an efficient retail CBDC, which
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is part in that payment system. And why it
is an interesting example, because Cambodia
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leapfrogged traditional RTGs system to use
an industry driven retail payment system as
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a way to deal with retail payments. So some
different examples are different use cases.
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Different need are driving different central
banks interest behind CBDC.
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So, back in June, the MAS has announced that
it was going to collaborate with China in
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the development of a CBDC technology. Can
you tell us more details about what this collaboration
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was about and what kind of results that brought?
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We work with many central banks, and one of
the central banks, which we are interested
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to work with, is the People's Bank of China.
They are doing their production, their pilot
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trials for retail use. We are talking to them.
Can that be about a broader partnership where
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we, what are they learning from their pilot
trials. And what we are learning from our
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wholesale trials. That's the way to collaborate
and find a way. Together, we can do something
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in the space. So this is very early stage
of discussion. We hope as we get to some tangible
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projects, we should be able to share more
what is happening in that space.
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So DBS, which is Singapore's largest commercial
bank and the largest commercial bank in Southeast
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Asia, is going to launch its own cryptocurrency
exchange, which is going to be regulated by
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the MAS. So what do you think is going to
be the impact of this launch on the whole
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South-East Asia cryptocurrency market?
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You're referring to that, so supposedly they're
launching a cryptocurrency exchange.
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Look, this is a natural progression in any
innovation and there has been a very clear
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growing interest in digital assets and that
there's a need, there's a definite need for
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customer service for this last year. And I've
been talking about it for the last two years,
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that as this digital assets are coming through
in different forms and shapes, there's a need
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to think about a very, very nice custody service
for these assets with all the hacks and all
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the complex processes goes behind it. So it's
only natural for a finance ministers like
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DBS to look to capture this opportunity of
providing custody service for digital assets.
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And there'll be greater competition in this
space. I think DBS is thinking about it definitely.
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That's a very smart thinking, and different
institution will have a different level of
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operational skills and they'll provide different
kinds of services to provide the necessary
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custody need for such assets. As, as you always
hear, that fintechs are always pushing banks
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out of that comfortable traditional finance
space. And it's very encouraging for us to
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see DBS to think about such new areas where
they can add value and create a new service.
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And this is truly a sign of the maturity of
the Singaporean tech sector. And I always
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said the fintech sector in Singapore would
be quite unique from the rest of the world,
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because here we don't see the difference between
fintechs and the bank. To us, it is that both
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are complementary.
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They come together, they work together. In
some cases, fintechs are providing a competing
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financial services and if they do, we have
an ability to regulate them. In most cases,
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fintechs are working with the bank so that
banks can launch innovative product.
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Banks can digitize faster and that's the sign
of a partnership. So we are quite thankful
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to our ecosystem to show that those maturity
in thinking as we progress forward.
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Singapore's central bank is going to host
its fifth fintech festival this year, and
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this year it will be in collaboration with
Blockshow, which is a cryptocurrency conference.
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So can you tell us what is the purpose of
this collaboration from the point of view
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of the monetary authority of Singapore?
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This time, the background drop is COVID crisis.
And we want to ensure that the content has
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relevance to the crisis we are all going through.
We are focused on many of these aspects of
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recovery. We have, we have a day on economic
summit, we'll talk about all the necessary
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economic thinking behind how to recover faster.
We have a day, we'll talk about the infrastructure
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required to digitize faster. We have a day
on impact, impact on society, impact on the
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green, climate change. We also have a day
for investors, another day for talent. Now,
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for each of these days, we have something
on the crypto space, something on the blockchain
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space. We are going to share with you speakers.
We are not going to give you a very generic
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word about blockchain and crypto. They'll
be asked very tough questions on how that,
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how the crypto is useful? How much they have
progressed, where's the seed going? What are
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the regulatory challenges behind it? What
should we do other regulators to make it work?
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Now, the question you asked about Blockshow,
why Blockshow. I think, I personally, personally,
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I've been extremely impressed by what they've
done in the space. And I spoke in their event,
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they bring up a strong lineup of speakers
who join the event and they have a very different
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way to showcase the whole space, what goes
on in blockchain and crypto. They are not
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championing a certain view of crypto or blockchain,
they try to bring a diverse set of opinions,
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partners, participants to this whole platform
and try to get a better narrative of blockchain.
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Thanks a lot, Sopnendu. It was great to have
you on our show.
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Thank you, thank you for having me. It was
a pleasure.
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That was Sopnendu Mohanty, chief fintech officer
at the Monetary Authority of Singapore. I'm
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Giovanni, your host. If you enjoyed the interview,
don't forget to subscribe to our channel.
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