Angie Lau: Hi everyone, I’m Angie Lau, Editor-in-Chief of Forkast.News and your moderator for this next panel at Singapore Blockchain Week 2020.
It is my honour and my privilege to host the conversation that you’re about to experience, and so, welcome!
We’re trying to figure out what financial institutions and blockchain innovations are doing in 2020. In, you know, our present-day environment
we’re really feeling the change of digital transformation. At the same time, financial transactions must keep the world working
must keep the economy going, and fintech is a critical part of the equation when it comes to that.
Singapore and the rest of Southeast Asia have become truly a hotbed for fintech innovation. And among the region’s most notable
startups include cashless payments and mobile wallets. You’ve heard of GoPay, GrabPay, Paytm…
but where are the legacy institutions, the financial institutions? Don’t count them out just yet, because, in this panel,
we’re about to hear about the blockchain innovations and integration at some of the top global firms in the world.
Without further ado, let me introduce to you our panellists right now. Dr Steven Hu leads the distributed ledger technology programme
within the global liquidity and cash management business at HSBC. In his current role, he focuses on solution and capability development,
leveraging the distributed ledger to drive innovations in the payments landscape. Welcome to you Dr Steven Hu.
We have Mark Attard, he is Executive Director with JPMorgan’s wholesale payments team and is currently Business Programme Manager for digital function in the Asia Pacific. Mark, hello to you.
Mark Attard: Thanks Angie
Angie Lau: Ashok Venkateswaran is Vice President of Product Development at Mastercard. A senior technology leader with
over 15 years’ experience over a broad spectrum of technology engagements in both client-facing and internal environments. Ashok, hello.
And last but not least, we’ve got Tanvi Ratna. She is the Founder of the think-and-do-tank Policy 4.0
which works on digital currency and cryptocurrency issues. She has deep experience with blockchain regulation around the world.
With leading blockchain hubs, she has worked on blockchain at EY and she is also helping guide global decision-makers
such as Narendra Modi in India, in U.S. Foreign Affairs Committee on Capitol Hill, and several ministries
and state governments in India about blockchain. So, it’s a pleasure to have all of you here.
I’m just going to throw it out there. What is everybody doing in the legacy, institutional space?
I think a lot of the blockchain industry, and certainly, our audience understands there’s so much excitement happening in emerging technologies,
in applications, in the startup world. But what are financial institutions, the legacy players…
what are they doing? Dr Steven Hu, Steven, I will start with you over at HSBC.
Dr Steven Hu: Thank you Angie for the question. At HSBC, what we have seen, is that blockchain has evolved itself
into a backbone ecosystem technology that empowers the cross-organisational business transactions flows.
We have seen this happening in the application of blockchain in multiple sectors,  ranging from the financial services to real estate,
or you know, e-commerce or even in manufacturing. In each of the sectors, we’ve seen the unique advantages of having that.
So that is to improve the level of automation, the efficiency as well as the trust among different business parties,
and therefore reduce the overall costs of the risks. But you know, as with all the services that require, as the last step requires,  payments.
The future blockchain-based digital ecosystem will need to integrate into the existing financial infrastructure.
And at HSBC, our focus is to investigate how this can bridge the gap between the real world and the blockchain world.
So recently we have done a partnership with a Singapore Exchange and Temasek Holdings starting from the end of last year
investigating the next generation corporate bond issuance and the settlement platform. Recently we have also been
invited to the World Economic Forum, Central Bank Digital Currency Working Group. All this is happening and we have been working hard to invest in this.
Angie Lau: You're absolutely right. It's that last-mile delivery from B2… There's a lot of B2B going on, but B2C,
where does the individual customer, the client, the person on the ground when they go to pay for coffee or anything else like that, or they're trying to pay their rent?
You know, Ashok, this is very much… MasterCard, if that's not B2C, I don't know what it is. But in terms of that last-mile delivery,
where the individual using that MasterCard or that method of payment, how is blockchain being integrated, or at least thought of?
Ashok Venkateswaran: Well, I mean, you know, we're, first of all, you know, I'm not too crazy about the legacy tag. But we've kind of changed
and evolved over the last 20 years to become more of a technology company. Everybody kind of says that, but we really, we really dug that fight.
And what we've done over the last five years is actually identify how blockchain plays a role.
And we actually built our blockchain from scratch.
We didn't actually go in and acquire or use an existing technology like Hyperledger or Ethereum, we actually built it from scratch.
So we were able to actually put our technology team at the heart of our technology. Then we said, okay, you know,
our core thing is still payments. So as a result, we're like, oh, how can we solve things with, that surrounds payments?
So we've come up with obviously the basic like the cross-border payment methodology on blockchain.
We've come up with provenance which allows you to track and trade different merchandise coming from different areas.
It gets into our core, which is planetary inclusion. Then we've also gone into, you know, trade financing.
How do we really work with some of our ecosystem partners like HSBC and JPMorgan, to provide them with additional information
so that way, they can also make better decisions for their blockchain strategy? So, for us, it's kind of intermingled
and you're looking to the future to see how we can put blockchain into additional rails use it as a third rail, so to say, to expand our reach.
Not only to our consumers, but also to the unbanked who are or are not part of the ecosystem at the current moment.
Angie Lau: There's a lot of people, 1.7 billion around the world. And that is a critical issue that must, beyond... need to be addressed.
Let me ask you this, Mark. As you're working, you know, internally within the system, we all know the timeline in which JPMorgan really thought about blockchain,
but here you are. It is 2020. What are you doing, in terms of integrating blockchain technology, we're hearing about the JPM Coin and all the rest,
how is that facilitating that kind of customer experience, even amongst your clients on a corporate level, and then to your individual wealth clients?
Mark Attard: Yeah, I think that's a great question, Angie. And I think one of the key initiatives that we launched last year was JPM Coin,
which really looks at the ability to move value across the network, and I think that's key to what blockchain is missing at this point in time.
We have a lot of blockchains out there in the industry that looks at process flow, process optimization, and making things much smoother.
But yet, as Dr Steven Hu said, it's all about... it breaks down when it comes to that payment leg, we have to go through the traditional rails,
we have to then come off with the blockchain and make that payment. Now, the advent of coin,
the advent of stablecoin on the blockchain gives us the ability to actually undertake atomic payments.
So it's the ability to use smart contracts that we can actually... if we have a tokenized asset, we have a tokenized ability there
on the other side of the blockchain, we can actually use smart contracts to start reducing risk, reducing settlement risk, and then
enabling that end-to-end lifecycle, that end-to-end e-commerce on the blockchain, and facilitate that through movements.
And as you've mentioned, we've been working with blockchain since 2015.
As MasterCard, do we have our own Quorum, which is an enterprise-grade solution? And we've been working with that,
really to look at what does the future for payments look like? And how can we use blockchain to facilitate the payments?
Because I think at the moment, the big buzzword used to be big data, it's now moved to blockchain and coin.
How do we actually value this? How do we create that optimization for our clients?
How do we reduce the friction points that really exist within the platform today? And how do we make it as interactive as possible?
Now, you've mentioned legacy systems and it costs millions, billions really, to update these legacy systems.
So blockchain gives us that opportunity to redesign and redevelop the way we interact with our clients, but also it enables us to create and facilitate new types of payments.
New types of marketplaces that don't exist today because of the legacy systems and the inability to do that.
I think that's where we're really looking at it from, from the potential that blockchain has.
And we think that that potential isn't going to be recognized over five to 10 years, it's probably a two to five year proposition from a recognition point of view.
So I really see this as being a game-changer for the industry. And really, this is the optimum time and
I think what's really helped is the awareness that has been raised over the past 12 months about blockchain.
And about the ability of value movement, we talk about 1.7 billion people who don't have access to bank accounts or financial system, but that's only one side of the coin.
We also need to look at wholesale side of the business as well, which has different needs and different demands to the retail world,
so I think we really, really need to recognize where, from a blockchain perspective, we can make benefits on both sides of that ledger.
Angie Lau: That's a great point. And Tanvi, you come to this conversation with a very unique perspective in that in your day-to-day job.
You are also functioning from a policy point-of-view, you know, especially with India where predominantly the issues not only of the unbanked,
but also issues of supply chain, issues of the ability to get services to people. How... when you hear, what HSBC, JPMorgan, MasterCard are doing?
How does that integrate with the policy thinking, the policy initiatives that are being directed with the countries that you advise?
Tanvi Ratna: Yeah, thanks, Angie for having me here. So my legacy institutional focus is the government, right.
Personally, I've been engaged on the regulatory and monetary discussions around blockchain across the world. So from the US, to Europe, UAE, Korea, India...
I'm also part of the ISO World Economic Forum working groups. So when blockchain comes to the level of government, it becomes very interdisciplinary
because the government is the one who has to look at all the trade-offs right between the legacy systems and what you are innovating... what the future brings.
All the security risks and all of that has to be decided at one level which is government. So Policy 4.0 is a pretty new and unique organisation in the space,
and we are working in a research and advisory capacity at the governmental level.
We're typically... the thinking on blockchain is fairly siloed in the world, right? So people will approach it either from a financial perspective,
or a tech perspective, or regulatory perspective. What we specialise in is in bringing together the 360° perspective.
So whether it's the tech innovation side, the business opportunities that you're unlocking, the monetary regulatory aspects of bringing this cross-cutting perspective...
because governments have to put in a lot of national infrastructure to enable this blockchain future. Whether it's regulations, or it's things like sovereign currencies.
So what we are working on right now, as we are creating the world's first deep dive into the Chinese Digital Yuan,
because the Chinese government has done this interdisciplinary experiment in a pretty unique way and a pretty deep way. And so we're looking at its tech stack,
we're looking at what it means for the dollar and existing payment rails and FX systems, what it means for the Belt-and-Road,
what it means for the Chinese economy and banking sector. So this is the sort of thinking that slowly needs to come in at the government level,
because this sort of interdisciplinary expertise doesn't exist today. That is what we are creating.
Angie Lau: I want to pick up on your point about cross-cutting because it's absolutely true. But then I also use that as a metaphor for JPMorgan and MasterCard
that have very much siloed internal... internally developed proprietary blockchain, right. So this is permission-based, this is proprietary within the system.
I want to ask Mark and Ashok very specifically, how does this then transcend? How it must work in the real world?
There's a lot of blockchain protocols out there, there's not one that is dominating or dominant. How does MasterCard work with JPM?
How does MasterCard work with everybody else that isn't necessarily tied into your specific siloed blockchain?
How is the interoperability function and capability thought about as you grow the product and grow the technology within your firms?
Mark Attard: I think that's a great question, and that's one that the industry has been struggling with for a while.
And I think as part of Monetary Authority of Singapore is initiative Project Ubin.
The Phase Five report really focuses on interoperability between not only the payment systems, but other blockchains.
And the way we really see this is that we don't see one blockchain being dominant within a region, within the world, but we see multiple different ledgers,
multiple different blockchains out there. If you take trade finance, for instance, there's about four or five that I could name off the top of my head that are looking at that process orientation.
They're working all on different protocols. From our perspective, we want to make sure that the core to building any blockchain initiative
is the ability to interoperate, and the ability for the smart contracts to cross and to be able to talk to each other and leverage that so that we can work with MasterCard,
so that we can work with others outside of that. And I take (JPM) coin, for instance from our blockchain, it's an open-source technology.
So it allows other industry players to come on and actually use the protocols that exist but build their own application, build their own blockchain.
And make sure that at the foundation of all of that there is that interoperability at the heart of it, because at the end of it,
we want to make sure that from a payments point of view, from a blockchain, we're able to interact with multiple different blockchains and fulfill
that end to end lifecycle and ecosystem that will establish around the Asian population and broader beyond that the global population as well.
Angie Lau: Ashok?
Ashok Venkateswaran: I mean, I agree with Mark. We're like, what we've been doing over the last...
once we really got into the (blockchain) space, we have been really, really testing out how we are interoperable across multiple blockchains.
So our solutions can actually run on any blockchain. We've been testing it more recently on things like r3 Corda and Hyperledger just to see how they work, right.
The other thing we're actually testing, which is actually really cool is, you know, a transaction could really kick off on a JPMorgan or MasterCard and on HSBC, right.
That's, that's how you really think about payments. I mean, that's how it really works, you could start off with a MasterCard, and you know,  end up paying
somewhere else. So, similarly, we feel that we cannot restrict everybody to be on a single blockchain platform. So we expect interoperability,
we expect people to have different systems running. And, you know, they may even have a system which is not... a non-blockchain system.
So how do we really operate in that methodology as well? So we are experimenting with, playing with things, we're trying to see how it works.
So now what we're really creating right now is a sandbox environment internally, where people can come in and really try out some of these new services.
We are going to open it up to anybody who wants to kind of test it out. So they could actually bring their solutions in and try it on our own sandbox.
We want to try our things in their environment. So at the end of the day,
when there could be like two or three blockchains standing on its own, but we want to make sure that that it is available across the board.
Mark Attard: And I just want to, sorry Angie, I just want to pick up on one of the key points there with Ashok. And I think that is fundamental is that,
how do we connect to the existing payments mechanisms? How do we connect to these existing payment rails as well, because what we
don't want to do is just isolate people and isolate corporates and have them just located on blockchain and not able to actually come back into the real economy, so to speak?
Or the real-world payments network that exists. So it really is about bridging that gap as well.
So not just looking at the end-to-end ecosystem that exists on blockchain, but also how do we fundamentally get that off the blockchain back to fiat currency
so that they can operate with suppliers and the ecosystem that exists outside of the blockchain network. And I think that's one of the key fundamentals that,
you know, interoperability is one of them. And then the second point is how we relate that back to the real payments world as well.
Ashok Venkateswaran: Yeah, thank you Mark.
Angie Lau:
Well, that might be something, sovereigns are making headway themselves, right. I mean,
we've got China with DCEP, the Digital Currency Electronic Payment, the CBDC...
a lot of central banks are talking about a central bank-backed digital currency. How does that change the vision, even,
and the business innovation that's happening internally at your firms? Steven?
Dr Steven Hu: Sure. So I think, you know, there's a lot of developments, you know, coming from the regulators and coming from the industry first.
I think the starting point is consistent, that is, how to address a particular need from the customers. So the conversation that we are having,
a customer is ready to say, we all recognize there's a marriage of blockchain technology in the paper-based digital flows, but that problem of
how do we solve have not so far is the interconnectivity is between the blockchain and existing payment rail and financial infrastructure which we have done.
Particularly, you know, there has been a significant amount of work done by the Central Bank discussing and researching on the central bank digital currency implementations.
We have, at HSBC, we have participated in multiple around the world. It is very clear that the trend now is moving from a pure technological proof
to a policy-driven and regulatory department driven, and in turn, this actually influences back to a financial institution like ourselves,
to bring the value back to our own work. That is to bring the gap between the blockchain board and the financial infrastructure that we have today.
Angie Lau: And so Tanvi. When you're you're in, you know, when you're you're working with countries who aren't necessarily as caught up as China,
who's right now in the pilot phase with the four cities, you know, across China, they're integrating that right now
trying to figure out the system versus everybody else at different stages of development. How do we catch up?
What is the address? What is the response that that policymakers must consider?
Tanvi Ratna: Yeah, and I think it also ties into a previous question about what you unlock with us, right? And that's the fundamental question for any policymaker.
So, if you see in India, we also have fairly advanced FinTech infrastructure. Here we have the UPI system, so the flow of money, the interoperability of payments is sorted here,
and it's a fairly advanced as a system compared to any other country. But when you look at what the DCEP, or you know, cryptocurrencies really unlock,
they are programmable money. And that is the fundamental aspect that changes everything. It goes beyond finance.
It goes into the way we're organising society, how we transact, how we make decisions, how we engage.
So the DCEP and its design, it's pretty interesting in the way that they've abstracted away the aspects of blockchain smart contracts.
They've abstracted away the aspects of programmability. That is all things we will be talking about.
I think we're doing a special session at Singapore Blockchain Week on the DCEP.
What it can unlock, is things like, let's say, look at the sharing economy, for example, right?
So I could have a car tokenized on the BSN network in China, and I could have, you know, three people buy that car together.
And then the fact that you have a tokenized DCEP as well, you can actually set up the arrangements between them
so that they're only paying for the usage that they do have the car, they're only paying for the fuel they use,
they're only paying for the percentage of ownership they effectively have on that car, right?
So and that just sort of removes all the friction and trust barriers that are there today in the sharing economy.
So what would it unlock in the future? It's an entirely new set of business model.
Angie Lau: I can imagine all the 18-year-olds who are still living in their parent’s’ basement, thinking about a future household economy token probably shaking in their boots right now.
Tanvi Ratna: Yeah, so that is what programmability unlocks. I think, beyond the flow of money, it's programmability.
Angie Lau: And so you know, it is this kind of new world where again, Mark and Ashok, you've very, and Steven, you've all rightfully said about the interoperability.
How do you bridge from blockchain, and then, you know, really realise the value in the real world, right?
Well, how quick are we to that reality? We're in 2020. No one could have imagined what happened to us in the past six months,
who knows what's going to happen in the world in the following six months? You know, all bets are off.
But undoubtedly, what we can all agree on, is that it has ushered in, accelerated people's facilitation of use in a digital world in a digital environment.
It has just transcended what physically in the real world has restricted us to either staying at home or being in our own communities.
Having said that, how quickly can we get to that stage where all of this has become a reality? Where are we at this stage for the customer like myself?
In full disclosure, I'm a customer of MasterCard. I'm a customer of HSBC.
So when can somebody like me expect something that I can, you know, tangibly see, really recreating value for myself?
Ashok Venkateswaran: I mean, I think we're already here, right? Like, if you look at some of our offerings, we've got a crypto version of a MasterCard, right,
where you can have underlying cryptocurrency in your wallet, and then you can use that to spend on a daily basis.
And then you know, MasterCard will do the, your exchanges for you, right? So it's already here.
Then there is also as Tanvi was talking about, the whole programmable money pieces.
There are services that, you know, we're trying to build which is going to sit on top of a DCEP layer, which will... if you look at it
payments is kind of the last leg but there are a number of services which can happen prior to the payment.
So, we kind of were trying to get some programmable money piece where you can control some of those pieces, and actually give money more of an identity
and give it more life, it's processed from front to back. So a lot of the stuff is actually already happening.
I think the COVID situation is accelerated a lot more because of the fact that so many of us are stuck at home. We are a lot more digital.
We are getting... doing a lot more things online. I mean, I haven't used cash for years.
I mean, living in Singapore, Hong Kong. I'm sure your last time you paid for... used cash for anything was a long time ago. So I think he's already here.
What's really going to change is that adoption is going to increase dramatically. And I think it's going to happen overnight, and very, very fast.
Dr Steven Hu: Just to add on to the points which Ashok has shared with us, right. I think the starting points of talking about how far this could be,
it depends on whether we can identify and solve the real customer problem, and how far this can connect the blockchain ecosystem to the existing financial infrastructure.
It is a bit hard at this point of time to say whether it's a one month, three months, or six months, or a couple of years, but there are a few factors I think we have to consider.
So, for example, there is going to be technical or procedural changes for the customer.
If we talk about corporate treasurers, what will happen practically? There was going to be investment and business cases, right.
Secondly, it’s from the regulator perspective, how are we going to regulate and treat these kinds of new business transactions, and then ultimately…
knowledge being transferred to the ultimate customers.
Not to mention, there are concurrent developments of a central bank digital currency which is also a hot topic right now.
So although these I think will ultimately determine how fast we can move and where we can reach at.
Angie Lau: And right when we thought we were all caught up with emerging technology, now is you know,
last year, we saw this trend and it's only increasing with greater momentum… it’s DeFi.
The year of DeFi could be the years of DeFi... decentralized finance. Is this a threat for financial institutions? Or is this an opportunity?
Mark Attard: Tanvi I was hoping you, from a regulatory standpoint or all your work through there, start us off.
Tanvi Ratna: I think DeFi is, from a regulatory standpoint, very confounding, right. We just saw the FATF give their first comments on it this week.
But in terms of the future that it sort of unlocks, I think DeFi is like the ultimate cypherpunks. The ultimate crypto future where everything runs algorithmically.
I would say it's almost like a fringe within a fringe, like if you have vegetarianism as a movement and you have vegans, right. I think DeFi are the vegans.
It's one version of the future. I think a lot of the most cutting-edge aspects that we even see in the DCEP are somewhere deriving from the functionalities from DeFi.
Mark Attard: Just on DeFi. Similar to Tanvi’s view, I'll take the veganism and that seems to have been popularised so we're going to have to watch DeFi grow otherwise.
Because I think everyone seems to be a vegan these days and it's growing in popularity. But really, it really looks at that unbanked population
and again, if we put it into the world of e-commerce that we have between retail and wholesale,
we don't really see wholesale movements in there at this point in time because obviously they're entrenched with financial institutions.
We're seeing small value movements at this point in time, and we're seeing what it can grow to be.
So I see both as an opportunity and a threat, depending on which segment of the market you're looking at,
and depending on where you think it's
going to go and the growth of that.
I think COVID-19, as you rightly pointed out, Angie, no one expected it. So it'll be good to see once this new normal settles in,
what actually happens with the fire and where that goes, because the potential there is to see how an intrinsic downturn in the economy can impact upon these nascent new technologies.
Angie Lau: Are nascent new technologies impacting not only the current day but our future thinking?
I just want to thank every single person on this panel for really helping us kind of get a little bit more insight into what that future thinking is
at some of the top global firms in the world, and where you're leading us, and how that tomorrow looks like.
Steven, Tanvi, Mark, Ashok, I want to thank you very much for joining us on this panel of Financial Institutions x Blockchain.
And everyone else at Singapore Blockchain Week, thank you for joining us on this panel.
There are so many more panels to experience and I welcome you to sign up and join there as well. I’m Angie Lau, Editor-in-Chief for Forkast.News.
It was my pleasure to be your moderator and your host this past half hour.
Thank you to our panellists, and thank you to our audience. Until the next time, bye-bye!
