Summary of presentations delivered on the keynote subject, Taiwan’s politics and its economy.
Prepared by Aurelia Autret – graduate student, EMBA Business School in France
Blockchain/DLT and implications for the Financial Industry
Presented by Carl Wegner – Director of Business Development Greater China, R3
Over the past months, Distributed Ledger Technology (DLT), often referred to as Blockchain, has stirred a lot of interest and enthusiasm across the financial industry. The blockchain is a way to structure data. This coding breakthrough—which consists of concatenated blocks of transactions—allows competitors to share a digital ledger across a network of computers without the need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest.
Although discussions are still at a very early stage, DLT is believed to have the potential to substantially change the way financial markets are operating today, promising important cost savings and efficiency gains in particular in the post-trade space.
The most impactful DLT applications will require deep collaboration between incumbents, innovators and regulators, adding complexity and delaying implementation.
For this implementation to be successful, financial infrastructures have to be replaced, which require significant time and investment. Aligning key stakeholders for collective action will require a difficult balancing of interests in the face of diverging interests. Existing regulations, standards of practice will require changes in order to implement new financial infrastructure, and new legal and liability frameworks have to be created.
Achieving all of this will delay large-scale, multi-party DLT implementations in highly regulated markets.
A Distributed Ledger (DL) is an asset database shared across the network, which can be financial, legal, physical or electronic.
- Kind of a “secured spreadsheet”, it sits in the cloud that multiple parties can review.
- Each transaction is guaranteed by a set of cryptographic keys.
- All transactions are stored and updated in one database in real time.
- Automated logic can be added to the ledger to trigger rules and actions.
- Movement of value between counterparties occurs without having the need to trust because that’s built into the mechanism. No need for a centralized third party to do that.
DLT is not a panacea, instead, it should be viewed as one of many technologies that will form the foundation of the next generation financial services infrastructure, and it has a multitude of potential applications:
R3 is a financial innovation firm that leads a consortium partnership with over 80 of the world’s leading financial institutions and regulators. They work together to design and deliver advanced distributed ledger technologies to the global financial markets.
The Fintech Revolution: Democratizing finance and transforming our life to the digital economy.
Presented by Joanna Yang – Founder and CEO, Robo Webtech
After the 2008 crisis, people have found out the current financial system that we are using has its defects.
The financial systems remain vulnerable to major crisis and it occurs each time with almost rhythmic regularity, sharing the same general characteristics. If nothing is done in order to adapt to this virtual circle, we will face other financial crisis again.
The 2 main issues in the current commercial banking business model that came out from this financial crisis:
- Fiat currency: no more linkage between gold and currency. If more currency is being printed, the value of the currency will defect.
- Commercial bank’s business model: resulting inflation and credit bubbles.
The 2008 Global Financial Crisis has a tremendous impact on financial systems and changes followed since IMF seeks for serial rearrangement in financial reform.
Occupy Wall Street in 82 countries’ 2012 event has a major impact on this financial technology transformation.
So what is Fintec? This new approach to finance is an economic industry composed of companies that use technology to make financial services more efficient. Financial technology companies are generally startups trying to disintermediate incumbent financial systems and challenge traditional corporations that are less reliant on software. Fintech business is more consumers oriented than the traditional banking models. Bank services are being replaced by Fintech, piece by piece; it has been the fastest growing industry in the last 3-4 years.
Concerning global Fintech financing activity, which combines lending, insurance, payments, deposit accounts, back office operations, etc. lending is the fundamental model for financial institutions to make money. The whole banking system relies on the lending itself (for Taiwan banking’s market 80% of the whole banking system profit comes from the lending).
Some applications of Fintech: peer-to-peer lending (P2P), a method of debt financing that enables individuals to borrow and lend money – without the use of an official financial institution as an intermediary (e.g. banks and insurance companies).
Moreover, Fintech is highly related to a lot of local monetary policies, so the government support is necessary.
Regarding Taiwan regulation’s environment:
- P2P or other not-touching current Banking Law or other financial laws will be able to proceed without FSC’s approval.
- FSC published a “FinTech Innovation Experiment Rule” draft as Taiwan version of FinTech Regulatory Sandbox to cope with those businesses will touch Banking or other financial laws. This draft will be expected to pass legislation process in the next few months.
Some associations of new Fintech companies has been created recently in order to promote digital Taiwan facilitation, by lobbying the Taiwan government to get more information and encourage it to adopt regulations to this new field.
Although Taiwan is a bit late in the Fintech revolution and behind other countries, the government highly value Fintech transformation as one of the cores of their policy and we can see big progress so far. Taiwan will gradually get more and more Fintech players.