Ravi Menon: Decentralised finance and the future of money Panel remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Andrew Crockett Memorial Lecture by Mark Carney, via Video Conference, 28 June 2021. * * * Thank you for the opportunity to engage on Mark Carney’s deeply thoughtful lecture. Mark has given us a powerful rendition of the transformation taking place that will “re-wire” our monetary and financial systems. Centrifugal forces are driving financial functions away from the traditional core. These forces are not just affecting money, but all aspects of the monetary system. Mark also reminds us that, amid this transformation, money has to be anchored on “values of trust, resilience, dynamism, solidarity and sustainability”. I cannot agree more. I’d like to focus on: the decentralisation of finance across the three ‘I’s of the monetary stack — intermediaries, infrastructure, and instruments; and how central banks and regulators can potentially shape this decentralisation in a way that upholds the critical values of money that Mark has highlighted. Let me begin with Intermediaries, at the top of the monetary stack. The delivery of retail financial services is being decentralised. This is happening in two ways. First, finance by non-financial players. There is now a much broader range of non-traditional – and often unregulated intermediaries in the retail finance space. This is not just BigTechs, but also FinTechs and smaller technology firms. These players provide payments, lending, savings and investments as complements to their core digital service.

By bundling financial and non-financial services, they are able to better meet the needs of consumers. Second, embedded finance by financial players. Regulated financial institutions are reinventing their business models and leveraging on technology to connect with customers at more and varied touchpoints. Financial institutions are “embedding” their offerings in an array of non-bank digital platforms in an attempt to reach new customers at lower acquisition costs. Embedded finance combines the benefits of platform economics with the trust premium that people still place with regulated financial institutions. Central banks and regulators should welcome both these developments. They offer the prospect of more efficient, more affordable, more inclusive financial services. 1/4  BIS central bankers' speeches  But we need to be alert to new sources of risk. If the distributor and underlying provider of a financial service are not the same entity, who is accountable to the customer? As the number of 3rd-party intermediaries involved in a financial service grows, there might also be increased operational risks. We will need to adapt our regulatory approaches. Pay greater attention to market conduct, consumer protection, and technology risks. Regulatory frameworks will need to become more modular and agile. Entity-based regulation remains relevant for the provision of key services such as deposit-taking, insurance, and the offer of securities. But for the growing number of players who offer niche financial services, we need to rely increasingly on activity-based regulation. This is all still fairly familiar ground, as the fundamental structure of financial services remains largely intact.