Singapore and the UK are deepening cooperation on Fintech and Sustainable Finance

Singapore and the UK recently agreed to deepen bilateral cooperation on fintech and sustainable finance in a move to modernize financial regulation for the digital age.

The two countries agreed Memorandum of Understanding on the FinTech bridge between the UK and Singapore 25 November 2022, at the 7th UK-Singapore Financial Dialogue held in Singapore. FinTech Bridge is not a legally binding agreement, but rather serves as a structured engagement to collaborate on industry issues, share information, promote innovation and develop a regulatory framework in the future.

In Asia, Singapore is a leading fintech and sustainable finance powerhouse. At the start of 2021, over 40 percent of fintech companies in Southeast Asia were based in Singapore, underscoring its role as ASEAN’s financial hub.

As two prominent financial powers, cooperation between Singapore and the UK on fintech and sustainable finance has the potential to influence global policy and regulation of these industries. Here we look at the main features of the agreement and the implications for Singapore’s emergence as Asia’s leading hub for fintech and sustainable finance.

What are the key features of the UK-Singapore Fintech Bridge?

In practice, the FinTech Bridge is a structured engagement between Singapore and the UK to develop guidelines and share best practices to promote and regulate fintech.

The FinTech bridge can therefore be seen as the starting point for the development of a shared regulatory approach between authorities that seek to preserve fintech innovation and investment while addressing the sector’s lack of regulation and the risk this poses to the financial system. It also seeks to guide the development of sustainable finance by identifying areas for common standards and regulation.

Sustainable finance

Singapore and the UK discussed cooperation on sustainable finance within the framework of the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius from pre-industrial levels.

Transitional financing

Singapore and the UK agreed to cooperate on transition financing, including driving international consistency in the design and publication of transition plans. They will work with partners such as the UK Transition Plan Taskforce and the Singapore-based Asia Pacific office of the Glasgow Financial Alliance for Net Zero to explore opportunities for collaboration.

Disclosure Standards

The two countries will continue to work with international organizations such as the International Organization of Securities Commissions (IOSCO) and the International Sustainability Standards Board (ISSB) to implement a comprehensive global baseline of sustainability-related disclosure standards. They will also phase in mandatory climate-related financial disclosures.

Green washing

Singapore and the UK agreed that regulators should continue to discuss how to adopt a “global, coherent and coordinated approach” to regulatory oversight of ESG rates to combat greenwashing and to promote comparable and reliable data. Technology solutions like Singapore’s Project Greenprint will be important to enable such an effort.

Natural capital and biological diversity

Both countries agreed on the need for a globally consistent framework for nature-based disclosure. They also agreed to work together to build capacity and understanding of the potential for nature loss and degradation to generate economic risk and cause adverse business and community impacts. They will do so by engaging with academia based in both countries.

Fintech

In addition to sustainable finance, Singapore and the UK discussed cooperation on fintech. This conversation took place within the context of a volatile market for cryptocurrency and blockchain technology that presents short-term challenges and long-term opportunities.

Crypto assets

In relation to cryptoassets, Singapore and the UK shared “strong agreement” on the need to support safe and risk-managed development of a digital asset ecosystem. They discussed the risks and challenges that cryptoassets pose to financial stability and compared their respective progress in strengthening consumer protection rules and regulation of stablecoins. Both stated their intention to continue engaging with international institutions such as the Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI) and IOSCO to help shape global regulation of digital assets.

E-wallets and digital banking

Finally, the two countries shared updates on other fintech developments. Namely, Singapore shared the progress in its review of e-wallet capsules and gave updates on new digital banks that have opened in the country.

Growing economic ties between Singapore and the UK

At its current stage, the UK-Singapore FinTech Bridge has delineated a number of areas for the two countries to collaborate on the development and regulation of fintech and sustainable finance, but does not have much in the way of concrete achievements. By the next dialogue, which will be held in London in 2023, it will become clearer whether the FinTech Bridge results in policy progress.

Regardless, the FinTech bridge is testament to the ever-growing ties between Singapore and the UK since the latter left the EU and sought closer economic ties with Asia. It is a relationship that has put finance and the digital economy at the fore.

In early 2022, Singapore and the United Kingdom signed Digital financial agreement, which was the first digital-focused trade agreement signed by a European country. The agreement focuses on promoting digital commerce by standardizing systems for e-payments and e-invoicing, and encouraging the participation of small and medium-sized enterprises.

Furthermore, at the end of 2020, Singapore and the United Kingdom signed a Free trade agreement, which represents the UK’s first free trade agreement with a South East Asian country. The free trade agreement cut tariffs, reduced non-tariff barriers and offered increased market access, including for financial services.

Within the context of the deepening economic relationship between Singapore and the UK, it seems likely that the UK-Singapore FinTech bridge will facilitate more collaboration on fintech and sustainable finance in the years to come. This partnership will further strengthen Singapore’s role as Asia’s leading hub for both fintech and sustainable finance