Regulating evolving technologies is a delicate balancing act. Too much regulation can stifle innovation and deter investment. On the other hand, too little regulation can create uncertainties, arbitrary enforcement and—once again—stifle innovation and deter investment.
Singapore has been touting its regulatory environment and actively promoting itself as a Smart Financial Centre. Its well developed financial system and regulatory framework is a pull for foreign investment—as noted by, for example, PING, a Chinese insurance group that launched an online investment platform in Singapore last year.
Singapore routinely ranks among the top countries in the world for ease of business. In addition to its strong legal framework and regulatory environment, it is particularly attractive to the fintech sector due to a favorable tax structure, a growing and dynamic start up community and the fact that Singapore is home to numerous leading banks and financial institutions.
There are examples of where less regulation is more. In June 2017, the Monetary Authority of Singapore (MAS) streamlined regulatory requirements for banks to conduct or invest in digital platforms that would match buyers and sellers. The MAS has launched a “Financial Sector Technology and Innovation” scheme that has allocated up to S$225 million until 2021 to help promote Singapore’s fintech sector. This has included establishment of a Fintech Office in 2016.
The MAS’ risk-based approach to fintech is aimed at ensuring that regulation does not stifle innovation. This is achieved by applying a material and proportionality test: when risk posed becomes material, regulation—proportional to the risk posed—will be introduced.
In other cases, more regulation is more—whereby more stringent regulations have promoted stricter adherence to more detailed requirements: for example, early this year Singapore’s Commissioner of Charities developed a new Code of Practice for Online Charitable Fundraising that aims to boost transparency and accountability in the charity sector. In practice, provisions of the Code are not mandatory but crowdfunding sites are expected to comply with them. Essentially, the Code is aimed at ensuring that those who use crowdfunding platforms declare that they are aware of all applicable fund-raising laws.
While Singapore has facilitated online platform entrepreneurialism, it has not eased regulations on all aspects of the digital economy. While scoring almost full marks on ease of business rankings, Singapore has ranked near the bottom of rankings on press freedom.
Singapore’s tight regulation of the internet—particularly as this relates to online bloggers and news media—prompted the Economist to declare that “light touch regulation has been replaced with the mailed fist.” A reminder that, in some cases, more regulation is less.
Photo credit: Pablo Fernandez