financial intermediaries. it is a fundamentally different approach to financial infrastructure, compared to the centralised systems of today. defi is already a growing reality, albeit nascent. crypto tokens are bought and sold on decentralised exchanges, without the need for intermediaries to clear and record the trade. another example is borrowing and lending, where anyone can lend and borrow directly to others via a liquidity pool managed by a smart contract. defi has the potential to yield significant economic and social benefits. by replacing intermediaries and central counterparties, these open crypto networks can potentially reduce the cost of finance. when firms of all sizes, and even individuals, can directly access financial infrastructure, it could mean more competition and inclusion. but defi is not without risks and vulnerabilities. these open crypto networks are not at the stage where they can meet the high standards of governance, security, and resilience that are required of critical infrastructure by central banks and regulators. there have been some unsavoury practices in this space : “ flash loans ” being used to manipulate prices in the market ; bots being used to front - run retail trades. with decentralised governance, who do you approach to recover lost accounts or reverse accidental transfers of money? existing regulatory frameworks will need to be adapted if defi becomes a reality. regulations crafted to manage risks in a world of intermediaries are ill - suited where intermediaries are replaced by smart contracts. enforcement is more challenging when control or governance is dispersed across the blockchain. mas will follow web 3. 0 and defi developments closely, deepen our understanding, and seek to harness the benefits while managing the risks. we will work with both the financial industry and the broader ecosystem to find the right balance. it will be a learning journey. regulatory sandbox plus and what better way to learn than by experimenting? we will facilitate experiments for blockchain and defi innovation through regulatory sandboxes. five years ago, mas launched the fintech regulatory sandbox, to support live experimentation of technology innovations. two years ago, we enhanced it with sandbox express, so that businesses can begin market testing of low risk activities in a pre - defined environment faster. mas will enhance its regulatory sandbox with sandbox plus. we will broaden participation to early adopters of technology, in addition to first movers. we will provide financial grants to first movers of innovation, to

asia must strengthen its infrastructure for allocating capital. banks are still the principal channel for allocating capital in asia, and post - asian financial crisis, many asian authorities have taken steps to strengthen their banks. banking systems were cleaned up of their non - performing loans, recapitalised, and strengthened. capital adequacy ratios were raised and a more risk - differentiated view was taken of bank assets. risk management systems were made more robust. it was in large part because of these changes, that asia was better able to withstand the global financial crisis in 2008 and 2009. 18. but much work remains to be done in one important area. developing asia needs to continue to develop its capital markets. the asian financial crisis was essentially due to a double - mismatch in bank financing – currency mismatches and maturity mismatches. this is where strong capital markets can play a useful role in allocating capital in a more balanced and efficient manner. they also help to deepen financial intermediation, so as to facilitate the deployment of the region ’ s high savings for investment within the region. 19. this was why, nearly ten years ago, the asean + 3 countries ( namely the ten nations of asean together with china, japan and south korea ) introduced the “ asian bond markets initiative ( abmi ) ”. the abmi has had a good start – the asian corporate bond market has grown by more than 2. 5 times during 2002 to 2010. but it is still too small relative to the size of asia ’ s investment needs. it needs to be more liquid and diverse. access to capital market funding is still mostly restricted to large conglomerates and government - linked companies. 20. emerging asia is also under - represented in the equity universe. the region ’ s 45 countries in the msci ac world index account for less than 10 per cent of the index although their share of world gdp is 19 per cent. 21. we need to make emerging asia ’ s capital markets deep enough to effectively intermediate its considerable savings pool and broad enough to provide a range of suitable instruments for risk mitigation. 22. the crying investment need in asia is for infrastructure. a report released by the asian development bank institute estimates that the total investment needs for national infrastructure development in asia will average close to us $ 750 billion per year from 2010 to 2020. but private participation in infrastructure investments in asia amounted to just us $ 15 billion in 2009, less than half the us $ 39 billion that