Singapore should pioneer cashless future
India is one of many countries in the race to implement blockchain technology and phase out physical cash
On Nov 8 last year, India's prime minister Narendra Modi shocked many of the 1.3 billion people in his country by taking out 86 per cent of the cash in circulation overnight without prior warning.
Mr Modi cited a need for greater transparency and the desire to fight graft as the main reasons to push for more electronic payments and expressed a vision of a cashless society.
A couple of months later, India's central bank announced it was researching what role the blockchain - the technology behind cryptocurrencies such as Bitcoin and Ethereum - could play in this.
Just this month, the Monetary Authority of Singapore (MAS) announced it has finished the first phase of "Project Ubin" which, according to its website, is an effort that explores the blockchain for clearing and settlement of payments and securities.
It is a technical way of saying that Singapore, too, is exploring a cashless future. The good old Singapore dollar could then theoretically be replaced by a tokenised cryptocurrency based on blockchain technology.
The financial infrastructures of India and Singapore are hardly comparable. India's efforts to implement financial tech, for example, are handicapped by a lack of access to financial institutions for large swathes of its population. Singaporeans can't turn a corner without stumbling on a functioning ATM.
However, losing this battle with India or other countries in the region to implement blockchain in the heart of the financial sector could harm Singapore's position in the long run.
The efforts and strategies of India and Singapore and the reasons behind them couldn't be more different, but these do have all the footprints of a race to the top among nation-states to see who is the first to remove cash from its society. Among the central banks that are currently testing currency tokenisation are the Bank of England, the People's Bank of China and the Central Bank of Russia.
Make no mistake, what is sold to the populace as convenience is in effect another step towards the eradication of privacy - sugar-coated and gift-wrapped by governments. One of the reasons that they re-purpose blockchain technology is to strip it of the possibilities to be anonymous - the very thing that made blockchain-based cryptocurrencies attractive in the first place.
EROSION OF PRIVACY
It's no wonder that watchdogs such as Privacy International agitate against a cashless future.
Data is the new currency, they argue: "Our financial transactions often stand as markers of the most intimate moments in our lives: the gift on our anniversaries, the medicine for a sick child. These intimate details are all there within our data. Taking away cash is taking away the choice that a person might make to keep these details private; taking away their agency, removing their autonomy and threatening their dignity. We may very well come to see the erosion of privacy as the legacy of demonetisation in India."
But to shoot down this technology based on arguments of privacy would be misplaced. Most Singaporeans already leave an extensive financial trail when using services such as NETS, PayLah or a UOB digital credit card.
The data that these services generate belongs to trusted local financial institutions. However, payments made with Samsung, Apple Pay or big credit card companies create personal data that is stored outside of Singapore and falls under US or South Korean jurisdiction.
Even people who hold off on digital finance and run their lives on cash - from the uncles serving chicken rice in a food court to criminals trying to minimise their footprint - can't escape this reality. Cash can be tracked quite effortlessly, too: the automatic scanning of serial numbers in ATMs works very well.
So maybe, we should just accept that as a society, we have already reached a 1984 Black Mirroresque society, whether we like it or not.
My personal prediction is that the MAS will eventually stop short of a push for a cashless society. As someone who has been working with blockchain technology and digital currencies since their incubation, I'm convinced that their added value doesn't lie in small consumer transactions but in larger settlements such as interbank payments.
To make a government-regulated push for a cashless society to fight corruption in Singapore would be an effort to solve a non-issue. And to expedite the demonetisation race in order to create an advantage over India and other Asia-Pacific countries that are exploring a cashless future would be to disturb market forces that have already pushed Singapore ahead of its neighbours.
But a coordinated effort by the public and private sector to implement blockchain technology to facilitate interbank traffic would be a huge win. If Singapore can create first-mover advantage in this area, it can solidify its position as the main financial centre in Asia-Pacific and create wealth for generations of Singaporeans to come.
The writer is a cryptocurrency and blockchain expert and the founder of Exante.eu, an online trading platform. This article was published in The Business Times yesterday.