The job of central bankers is to ensure the soundness of money and the financial system in their countries. So they often cast a wary eye at financial technology startups and the disruptive forces they can unleash. Not so for Ravi Menon.
As head of the Monetary Authority of Singapore, Menon manages the city-state’s monetary policy, but he’s also the top financial watchdog for banks, insurers, and asset managers. In 2016 and 2017, MAS shut down the local units of two Swiss banks and imposed more than S$29 million ($21 million) in fines on financial institutions for breaches of anti-money laundering requirements linked to 1Malaysia Development Bhd., the scandal-tainted Malaysian fund that’s the subject of investigations in the U.S. and Switzerland.
But when it comes to fintech—companies looking to provide services ranging from crowdfunding to robo-advisories—Menon is comfortable with a more relaxed approach. It’s part of the government’s goal of turning Singapore into a global fintech hub, as it seeks to offset predictions of lower growth and reduced employment in the wider banking industry. “There is an inherent tension in our policy objectives,” Menon says. “It is how the two—regulation and promotion—work in concert to create an environment that promotes innovation while ensuring safety and public confidence.”
Richard Koh, the chief executive officer and founder of M-DAQ Pte, recalls a meeting with Menon and other senior managers of the monetary authority earlier this year. Menon asked a few technical questions and jotted down notes as Koh explained how his company is developing multicurrency listing services for securities exchanges. Then Singapore’s most powerful financial regulator asked the entrepreneur: How can we help you expand your business? How can we do better as a regulator?
Under Menon, MAS became one of the earliest adopters of “regulatory sandboxes” for fintech companies, a concept pioneered by the U.K.’s financial regulator. Fintech companies with novel ideas are allowed to test their products in a set boundary before fully launching or ditching them. These startups include insurance broker PolicyPal, online money changer Thin Margin Pte, and Kristal Advisors Pte, which uses machine learning to help investors.
For Kaidi Ruusalepp, CEO of Funderbeam, a funding and trading platform for private companies built on blockchain technology, it’s the balance of openness and MAS’s reputation as a tough regulator that drew her to relocate to Singapore from Estonia in August. “Having MAS’s stamp is a big advantage,” says Ruusalepp, who’s in the process of seeking licenses. “There is no way of messing with them.”
Some worry that the open approach may lead to trouble down the road, in the same way that global regulators took their eye off the ball in allowing the rapid growth of the exotic products that helped cause the financial crisis. Fintech ventures, being digital and global, are naturally inclined to locate in jurisdictions with “light touch” regulations or special concessions, says Satyajit Das, a former banker and author of several books, including Extreme Money, who’s also a columnist for Bloomberg Opinion. “Past experience shows that this can be problematic,” he says. “This can sometimes store up fault lines, which are only revealed later in periods of stress.”
Menon says he’s aware of the risks. “There are many examples from our history where we’ve taken bold leaps—bold yet prudent,” he says. “If we go purely for innovation, we become a cowboy town. We think through issues very carefully.”