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10949_9789813238633_tp.indd 1 4/6/18 4:41 PM Other Related Titles from World Scientific Electronic Trading and Blockchain: Yesterday, Today and Tomorrow by Richard L Sandor ISBN: 978-981-3233-77-5 Trade, Currencies, and Finance by Morris Goldstein ISBN: 978-981-4749-57-2 Contemporary Issues in the Post-Crisis Regulatory Landscape by Imad A Moosa ISBN: 978-981-3109-28-5 Yulin - 10949 - Inclusive FinTech.indd 1 21-05-18 1:45:02 PM 10949_9789813238633_tp.indd 2 4/6/18 4:41 PM Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Names: Lee, David (David Kuo Chen), author. | Low, Linda, author. Title: Inclusive fintech : blockchain, cryptocurrency and ICO / David Kuo Chuen Lee (Singapore University of Social Sciences, Singapore), Linda Low (Singapore University of Social Sciences, Singapore). Description: New York : World Scientific, [2018] | Includes bibliographical references and index. Identifiers: LCCN 2018012983 | ISBN 9789813238633 (hardcover) | ISBN 9789813272767 (softcover) Subjects: LCSH: Finance--Technological innovations. | Blockchains (Databases) | Bitcoin. | Electronic funds transfers. Classification: LCC HG173 .L3796 2018 | DDC 332.1/78--dc23 LC record available at https://lccn.loc.gov/2018012983 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Copyright © 2018 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. For any available supplementary material, please visit http://www.worldscientific.com/worldscibooks/10.1142/10949#t=suppl Desk Editor: Jiang Yulin Typeset by Stallion Press Email: [email protected] Printed in Singapore Yulin - 10949 - Inclusive FinTech.indd 2 21-05-18 1:45:02 PM June4,2018 15:23 InclusiveFinTech 9inx6in b3207-fm pagev Contents Foreword vii Preface ix Chapter 1: Overview 1 Chapter 2: Digital Currency, Bitcoin and Cryptocurrency 33 Chapter 3: Introduction to Initial Crypto-Token Offering (ICO) 83 Chapter 4: The Characteristics of Token Investors 125 Chapter 5: Blockchain: An Introduction 173 Chapter 6: Blockchain: A Technical Introduction 207 Chapter 7: Inclusive FinTech 259 Chapter 8: FinTech in Singapore 307 Chapter 9: FinTech in ASEAN 381 v June4,2018 15:23 InclusiveFinTech 9inx6in b3207-fm pagevi vi Inclusive FinTech Chapter 10: Regional Trends and FinTech Future 437 Appendix: Interviews, Podcasts and Videos 449 References 483 Index 499 June4,2018 15:23 InclusiveFinTech 9inx6in b3207-fm pagevii Foreword When Professor Barry Marshall, Nobel Laureate in Physiology or Medicine, contacted me some months ago regarding my knowledge on cryptocurrencies, I had to confess that I did not know much, if at all, on the matter. I decided I would instead bring along my good friendandformercolleague, ProfessorDavid Lee,to discussthe subject together. Sure enough, when we met over dinner, the night was spent not chatting about health and medicine, nor economic growth and recession. Instead, we deliberated over cryptocurrencies, and Professor David Lee, as expected, answered every question that Professor Marshall brought up. Inclusive FinTech is a consolidation of Professor David Lee’s and Professor Linda Low’s knowledge and expertise on this new and emerging topic. Not much has been written about the subject and it is a timely book that elucidates the cryptocurrency market, and the linkages to large FinTech companies. Newfinancialinstrumentswillcontinuetodevelopinthefinancial markets of tomorrow, and while this might be easier for the newer generations to understand as they are well-acquainted with the digital economy, it is perhaps more difficult for the older and in- between generations. The key question is: Are cryptocurrencies here to stay? There are costs and benefits, and it requires a great deal of changing mind- sets and deeper understanding for investors, financial institutions and policy regulators. For example, regulating cryptocurrencies is vii June4,2018 15:23 InclusiveFinTech 9inx6in b3207-fm pageviii viii Inclusive FinTech difficult as it does not fall under the jurisdiction of any country. Regulation could strip away the attractiveness to investors. The value of cryptocurrencies is also highly volatile and dependent on market sentiments. Yet, there are also benefits such as the potential for microfinancing developing countries which lack access to formal credit markets. Nevertheless, we continue to observe that cryptocurrency hedge funds are increasingly being formed, and it only seems like cryptocurrencies are here to stay. This book is a useful reference to complement classic financial textbooks, with a modern take and the business perspectives of financial technologies, describing with clarity the concepts of new finance, trends in FinTech, blockchain, as well as Initial Crypto- Token Offerings. It provides a systematic and logical presentation of the key cryptocurrencies today, and sieves out the myths and misconceptions from the realities of the subject. The book covers applications in the context of China, US, Australia, India, ASEAN, Japan, and Singapore. It is an insightful and practical resource, and an enjoyable read for experts and the general public alike. Professor Euston Quah President Economic Society of Singapore Professor and Head of Economics Director, Economic Growth Centre Nanyang Technological University, Singapore Editor Singapore Economic Review June4,2018 15:23 InclusiveFinTech 9inx6in b3207-fm pageix Preface “Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their 1 massive overhead costs make micropayments impossible.” — Satoshi Nakamoto “The Times 03/Jan/2009 Chancellor on brink of second bailout for 2 banks.” — Satoshi Nakamoto The word “FinTech” is an invention in 2014 in response to the failure of traditional financial institutions to innovate despite the huge capital and technology at their disposal. The onset of the Global Financial Crisis (GFC) saw the emergence of bitcoin, a new centralised e-cash by the accumulated efforts of cryptographers, and invented by an anonymous group or a person by the name Satoshi Nakamoto. A few years before that in 2004, a centralised form of digital cash online payment was already born and mass adopted in China going by the name Alipay. The Chinese invented the term “Internet Finance” and that was 10 years before “FinTech” was first 1http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source 2https://imgur.com/pGYXHJh ix