MAS therefore takes the view that thoughtful and purposeful use of technology to drive innovation have been and will continue to be important for the financial industry to progress. In our regulatory role, the MAS also proactively engages the industry both to understand and even to shape the technology-driven transformations in financial services. 11 Technology can bring about new or heightened risks when mis-used or abused. So while MAS is supportive of financial institutions to experiment with technology to harness potential new opportunities, or to innovate existing processes, we also require that they understand and can manage the associated risks. It is this philosophy that underpins the MAS to be among the first regulators in the world to adopt a regulatory sandbox regime. 12 MAS regulatory sandbox provides a constrained but more flexible space for players seeking to test new technology or approaches before a full launch. Such sandbox pilots are held within defined risk parameters and are time-bound. These restrictions help to limit the impact from unsuccessful applicants but equally important, they allow MAS to also understand the new model up close – how it is run, how the technology or its application is used, how the risks are managed and the value proposition to clients before mainstream use and scalability. This will also allow the MAS to calibrate our final rules that are appropriate to the new business model or start-up while addressing any level-playing field concerns.
This is to ensure that these providers adopt the necessary measures and controls to manage money laundering and terrorism financing risks. Finally, there are digital tokens that represent ownership interest akin to securities, debentures or collective investment scheme products. These will be subject to existing laws under our Securities and Futures Act (SFA) including investor protection safeguards, as for conventional securities. 16 Technology is not only an enabler for the private sector. Many financial regulators also actively use technology tools and solutions to augment or improve surveillance, supervision and enforcement actions. More than a year ago, the MAS set up a dedicated SupTech Office to serve as an expertise hub to support our line supervisors across banking, insurance and capital markets. There are several ongoing projects to support business process automation and the adoption of enhanced supervisory tools and applications. We are also exploring the use of Data APIs to streamline the submission of regulatory data, and “live dashboards” for better visualisation of trends and analyses. Our supervisors will also be incorporating the use of Artificial Intelligence and Machine Learning to support big data and network analytics in our surveillance and enforcement work. Collectively, these and other SupTech capabilities will complement the industry’s drive towards RegTech for better risk management and regulatory compliance. 17 As financial services increasingly become digital, management of technology-related risks especially cybersecurity is paramount. MAS recently issued a consultation paper on a set of mandatory Cyber Hygiene requirements.