MAS Pledges S$150 Million for Tech and Innovation in Finance including Web3

Singapore's Monetary Authority (MAS) has announced a commitment of up to S$150 million over three years to foster technology and innovation in the financial sector. This initiative, known as the Financial Sector Technology and Innovation Scheme (FSTI 3.0), was revealed on August 7, 2023, and aims to accelerate and strengthen innovation within the industry.

Key Components of FSTI 3.0

Enhanced Centre of Excellence Track: Previously referred to as the Innovation Labs track, this component will now include corporate venture capital (CVC) entities. The funding support will cover up to 50% of qualifying expenses, capped at S$2 million per project. This will enable CVCs to mentor and support start-ups, helping them scale and develop resilient business models.

Innovation Acceleration Track: Recognizing the importance of emerging technologies like Web 3.0, MAS will conduct open calls for innovative technologies in industry use cases. Grant funding will be provided to support trials and commercialization.

Environmental, Social and Governance (ESG) FinTech Track: This track aims to support the development and deployment of projects that address ESG data, reporting, and analytics needs within the financial sector. Funding support will be up to 50% of qualifying expenses, capped at S$500,000 per project.

Continued Support for Advanced Capability Development: FSTI 3.0 will also continue to support areas such as Artificial Intelligence and Data Analytics (AIDA), and Regulation Technology (RegTech), with a focus on promoting AIDA adoption in smaller financial firms and supporting less digitally mature firms in acquiring RegTech solutions.

Historical Context

Since 2015, the Financial Sector Development Fund (FSDF) has awarded $340 million as part of the FSTI program to drive technology adoption and innovation in the financial sector. Projects that MAS has piloted include SGFinDex, Project Orchid's Purpose Bound Money, Project Veritas' Responsible AI, green and sustainable finance through Project Greenprint, and large payment initiatives like the cross-border payment linkage with Thailand.

The FSTI 3.0 scheme represents a significant step in Singapore's ongoing efforts to promote a vibrant technology ecosystem within the financial sector. By focusing on areas such as CVC mentorship, Web 3.0 innovation, ESG solutions, and AI and RegTech adoption, the initiative aligns with global trends and local needs. As Mr. Ravi Menon, Managing Director, MAS, stated, "With FSTI 3.0, we look forward to continued collaboration with the industry to advance purposeful financial innovation."

Global Landscape of Web3

Hong Kong is emerging as a significant rival to Singapore in becoming a hub for Web3. On June 26, 2023, Chief Executive John Lee Ka-chiu underscored Hong Kong's ability to leverage its status as an international financial center to foster the growth of advanced technologies, with a particular focus on Web3.0.

Further emphasizing this ambition, Financial Secretary Paul Chan, in a speech on July 9, 2023, articulated Hong Kong's goal to become a global leader in two burgeoning fields: green finance and Web 3.0.

However, recent data paints a contrasting picture. Crunchbase's statistics reveal a substantial decline in Web3 investment. Venture funding for Web3 startups, encompassing cryptocurrency and blockchain enterprises, plummeted in the second quarter of 2023. A total of just over $1.8 billion was raised across 322 agreements, marking a 76% drop in fundraising compared to the same period the previous year. This represents a 51% decrease in transaction flow and a more than three-quarter decline from Q2 2022, when industry entrepreneurs raised over $7.5 billion.