About Jamari

Singapore Correspondent of Focus Malaysia, a business weekly.

Extra-territoriality of ICOs

By Jamari Mohtar

Across the Straits

Focus Malaysia | Dec 15, 2017

Under its guidelines on digital token offerings issued on Nov 15, the Monetary Authority of Singapore (MAS) says a trading platform like Luno, which is a cryptocurrency exchange, will not be regulated in Singapore unless it introduces the trading of securities tokens.

Securities tokens are digital tokens that can be construed as capital-market-like products based on the commonalities with the products of a capital market in their structure and characteristics, says a MAS guide on digital token offerings.

Luno Pte Ltd, a Singapore registered company, has a subsidiary incorporated in Malaysia – BitX Malaysia Sdn Bhd – that runs the only cryptocurrency exchange in Malaysia which deals with the exchange of bitcoin to ringgit directly through a bank account. It also accepts deposit in ringgit directly from your bank account in order for you to trade in bitcoins. Last month, it introduced the trading of the cryptocurrency ether.

An online trading platform like Luno that deals in secondary trading of cryptos like bitcoins and ether will remain unregulated in Singapore, as these are not considered securities tokens and hence, the republic’s Securities and Futures Act (SFA) does not apply.

However, MAS intends to regulate the activity of exchanging virtual currencies to fiat currencies on trading platforms under a new payments framework that “will include rules to address money laundering and terrorism financing risks relating to the dealing or exchange of virtual currencies for fiat or other virtual currencies.”

The financial regulator considers trading platform as one of the two intermediaries that facilitate the offering or issuance of digital tokens in ICOs. The other intermediary is a primary platform on which one or more issuers of digital tokens may make primary offerings of the tokens.

Both kinds of intermediaries “will be required to put in place policies, procedures and controls to address such risks”. These will include conducting customer due diligence, monitoring transactions, performing screening, reporting suspicious transactions and keeping adequate records.

The moment a trading platform that trades in cryptos introduces the trading of securities tokens including futures contracts, it may come under the SFA, as the operator of such platform is seen as establishing or operating a market.

Such operator who “establishes or operates a market, or hold himself out as operating a market” needs the approval of MAS as an approved exchange or recognised by MAS as a recognised market operator under the SFA, unless exempted.

This has the following implications:

  • An existing crypto exchange which wants to expand its trading business by introducing securities tokens or crypto-based derivatives or other capital-market-like products may be subject to regulation under the SFA.
  • Similarly, an operator of a primary platform which deals with securities tokens may be considered as carrying on business in one or more regulated activities under the SFA, and thus must hold a capital markets services licence for that regulated activity under the SFA.

Such operators will also have to contend with the provision of the Financial Advisers Act (FAA) pertaining to financial advisory services, which require a financial adviser’s licence, as an authorized provider of financial advisory services.

Moreover, they have to be mindful too of the extra-territoriality of the SFA and the FAA. The implications are as follows:

  • Operators of a primary or trading platform, whose operation is partly in or partly outside of Singapore, or outside of Singapore, may have the requirements of the SFA applicable extra-territorially to their activities under section 339 of the SFA.
  • Where they are based overseas and engage in any activity or conduct that is intended to, or likely to induce the public, or a section of the public, in Singapore to use any financial advisory service provided by them, they are deemed to be acting as a financial adviser in Singapore and thus, may come under section 6(2) of the FAA.

MAS highlighted the following case in which capital markets services licence under the SFA and a licence for financial advisory services under the FAA are a must:

  • A firm in the business of developing properties and operating commercial buildings plans to raise funds to develop a shopping mall by offering digital tokens to any person globally, including in Singapore. The tokens are structured to represent a share in the firm and will be a digital representation of a token holder’s ownership in that firm. The firm also intends to provide financial advice in relation to its offer of the tokens.

Since the tokens will be a share, they constitute securities under the SFA and thus, the firm will need to comply with the prospectus requirements under the SFA.

The firm will likely require a capital markets services licence for carrying on business in the regulated activity of dealing in securities under the SFA. To provide financial advice in relation to the offering of its digital tokens, the firm will need 
to be a licensed financial adviser under the FAA.

MAS also highlighted the case of extra-territoriality in the following example:

  • A Singapore-incorporated firm with operations in the city-state intends to offer digital tokens to members of the public, but not to persons residing in the country. It will pool the funds raised from the offer and use the funds to invest in a portfolio of shares in fintech start-up firms. It will manage the portfolio of shares. Token holders will have no power relating to the daily operations or management of the portfolio of shares. Profits arising will also be pooled and distributed as payments to token holders. This enables token holders to receive profits arising from the portfolio of shares.

Since the tokens offered will only be made to persons based overseas (i.e. it will not be offered to any person in Singapore), Part XIII of the SFA will not apply to the offer.

But the firm may nevertheless be carrying on the business of fund management in Singapore ala collective investment scheme (CIS) if it operates the management of portfolio of shares in Singapore. If so, it will require a capital markets services licence for carrying on business in fund management. As the firm is not providing financial advisory service in respect of the tokens issued, the FAA will not apply.

It looks like the end for any firm, especially start-ups, to apply technology in an innovative way through the issuance of securities tokens via ICOs to fund the project, but a way out is through applying for the regulatory sandbox administered by MAS.

 

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

 

 

 

 

 

 

 

 

 

 

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New lease of life for ICO

By Jamari Mohtar

Across the Straits

Focus Malaysia | Dec 1, 2017

 A new lease of life is in the offing for the Initial Coin Offering (ICO) market when it got a wake-up call from Singapore’s financial regulator on Nov 15 in the form of a detailed guideline on digital token offerings.

 This followed from the Monetary Authority of Singapore’s (MAS) announcement in August that it would consider some digital tokens as capital-market-like securities.

The city-sate is actually not the first country to make this announcement. In July, the US Securities and Exchange Commission (SEC) had ruled that some of the digital coins for sale in ICOs are actually securities and thus, subject to the agency’s regulation.

The SEC had even charged in September two companies running ICOs with defrauding investors and selling unregistered securities. The owner of the two firms, claiming his tokens were backed by real estate and diamonds, had raised $300,000 from investors by just putting a white paper on a website.

This case has opened a can of worms because many, especially those in the cryptocurrency and blockchain technology movements, are awaiting for a clearer guidance from the SEC on what are the factors that may constitute a digital token as a securities token.

Then there is also a court precedent to be reckoned with, known as the Howey test. In a 1946 US Supreme Court SEC v. Howey, securities is defined as a scheme, which “involves an investment of money in a common enterprise with profits to come solely from the efforts of others.”

This has galvanised the US legal fraternity, especially those associated with the crypto and blockchain technology movements, to come out with their own interpretations of what constitutes a token that is outside the purview of the securities laws. This, in turn, revolves around failing the Howey test for a token to be considered as not securities.

The simple agreement for future tokens (SAFT) framework engineered by a New York legal firm and firms with a vested interest to make ICOs compliant with US securities laws, for instance, argues that one way to fail the Howey test is tokens must be delivered to investors only after a functioning product or service is in place, that is, after having a utility value.

“The network and the token must be genuinely useful such that they are actually used on a functional network,” says SAFT.

Others feel this is not good enough since the tokens were issued before they have a utility or functional value. In this view, the tokens must be issued from Day One as possessing utility value.

What motivated SAFT to come out with this framework is the unlocking of a major source of liquidity (the US investors) to flow into these ICOs in view of the fact several major ICOs had excluded US individuals then for fear of breaching the securities laws.

While the US was “mired” in a court precedent to come out with a detailed guideline on whether an ICO is just like an IPO (Initial Public Offering), MAS has its work cut out in being the first to announce a neater, clearer and seamless guidelines on ICO, thanks to the city-state’s comprehensive securities laws.

All MAS has to do is to use the existing securities laws governing its capital market and then see whether the structure and characteristics of a token, including the rights attached to it, have some commonalities to securities under the republic’s Securities and Futures Act (SFA) and the Financial Advisers Act (FAA).

For the uninitiated, an ICO works the same way as an IPO in that it’s a way for a company to raise money from the public. In a typical ICO, which can last anywhere from a few hours to a few weeks, the company invites people to buy digital tokens to fund a project.

These projects involve blockchain software such as Ethereum, which runs across multiple computers in order to create a tamper-proof digital ledger. The software can also be programmed to do things like create smart contracts or make investments.

The issuance of MAS’ guidelines does not mean that it will regulate all ICOs. The guideline may affect only the offering of digital token that can be construed as a product of the capital markets regulated under the securities laws administered by MAS.

What constitute a securities token?

MAS has provided three criteria in which digital tokens can be construed as capital-market-like products based on their structure and characteristics, including the rights attached to the token. These are:

  • A share where it confers or represents ownership interest, liability of the token holder, and mutual covenants with other token holders in the corporation;
  • Debenture, where it constitutes or evidences the indebtedness of the issuer of the digital token in respect of any money that is or may be lent to the issuer by a token holder; or
  • A unit in a collective investment scheme (CIS), where it represents a right or interest in a CIS, or an option to acquire a right or interest in a CIS.

All requirements of an IPO under the SFA, including exemptions, may be applicable to such tokens in an ICO. This includes the issuance of “a prospectus that is prepared in accordance with the SFA and is registered with MAS”. A mere white paper of the issuer posted on its website may no longer be sufficient.

If you’re wondering why I use the words “may be applicable” instead of “will be applicable” or “is now applicable” since the SFA is an existing legislation, that’s because the MAS’ statement in the form of a paper on “A Guide to Digital Token Offerings” uploaded on its website has the following disclaimer:

“The contents of this guide are not exhaustive, have no legal effect and do not modify or supersede any applicable laws, regulations or requirements.”

Hint of a transition period

This actually means ICO and cryptocurrencies, like bitcoins, remain unregulated items in the republic for now. But the guide seems to be hinting at a transition period before these could be regulated – for now, it seems “MAS will examine the structure and characteristics of, including the rights attached to, a digital token in determining if the digital token is a type of capital markets products under the SFA.”

This cautious approach is understandable and admirable. Understandable because cryptos and ICOs are new “animals”; admirable since the underlying technology behind their creation and issuance is the distributed blockchain ledger technology (DLT) which is a disruptive innovation that has the potential for varied use cases that could reform our financial markets, supply chains, consumer and business-to-business services, and publicly-held register.

But as with all things, innovation has its downside too where it can lead others with a nefarious bent of mind to “improve” further on the innovation with the aim of taking advantage of the loopholes and lacunae, if any, in order to defraud and scam the investing public.

Meanwhile, the offering of utility tokens as opposed to securities tokens via ICOs will remain an unregulated item in the republic. Nevertheless, this offering will still be regulated by entities other than MAS in the areas of combating money laundering and terrorism financing.

MAS highlighted the case of offering digital tokens to raise funds to develop a platform that enables the sharing and rental of computing power amongst the users of the platform, as an example of utility token.

Since such token gives its holders access right to use the platform, along with the right to use the token to pay for the rental of computing power provided by other users, with no other rights or functions attached to it, the token “will not constitute securities under the SFA”.

This could well describe in essence such crypto tokens as golem – the global, open sourced, decentralised supercomputer – which is associated with a decentralized sharing economy that allows people to rent out their unused computing power, or in the case of another crypto token, filecoin, unused computer storage.

In the next issue of FocusM, I will touch on the fate of a trading platform like Luno – the only Malaysia-based crypto exchange in the world that deals directly with the ringgit in your bank account – under the MAS guidelines.

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

Mixed blessings of ICOs

Profile of a fraud accuser

It was a roller coaster time for crypto currencies especially bitcoins – the most famous among the cryptos – in September through the middle of October. It all began on Sept 4 when China banned the Initial Coin Offering (ICO) platform used by startups to raise funds from the public for their innovative projects via issuing digital tokens.

Prior to this, in August analysts had already anticipated the move against ICO by China. Hence, the market had already factored in the ICO ban, and the fluctuations in prices and market capitalization of the crypto market thereafter were within a reasonably modest range for the next several sessions after the ban.

Until one loudmouth idiot started to label bitcoin as a fraud, then the crypto market soon went into a 40% dive. But even this did not constitute the end of the world for the cryptos as a fall of this magnitude is a recurrent pattern since late last year.

In mid July, for instance, it was far worse as the market had declined precipitously by nearly 50% from a peak in mid June, when it set an all-time high of a total market cap of US$115bil, according to data from Coinmarketcap. In just over 30 days, the market has fallen 50% to a low of US$61bil.

So the fall in prices and market cap due to China’s crackdown on ICOs was no big deal. Apparently, after the 50% fall in July, the market soon reached its previous all-time high set in June mentioned above and by August had already reached another record breaking all-time high of US$179.8 bil, which was on the eve of China’s crackdown on ICOs.

The immediate effect of the China’s ban was the erosion of market cap to below US$135 bil on Sep 5 (a day after the ban) before recovering to more than US$165 bil and dropping again to US$146 bil on Sep 8. After this, the market cap continued to fluctuate within a reasonably modest range for the next several sessions.

But all it took for the market cap of these coins to roll downhill was the declaration “bitcoin is a fraud” on Sep 13 by the loudmouth and rather inconsistent to the point of being schizophrenic CEO of JPMorgan, Jamie Dimon. By the next day, the market cap was reeling under this unfair characterization of Dimon to fall to US$112 bil – a 37.7% drop from its all time high in August.

Back in April 2015, Dimon, known to be famously dismissive of bitcoins had seemed repentant when he said his bank could learn from disruptive payment systems like bitcoin. He made the comments in his annual letter to JP Morgan shareholders, noting:

“You all have read about bitcoin, merchants building their own networks, PayPal and PayPal look-alikes. Payments are a critical business for us – and we are quite good at it. But there is much for us to learn in terms of real-time systems, better encryption techniques and a reduction of costs and ‘pain points’ for customers.”

The letter, which flagged the bank’s recent “record results” and incoming competition in the payments space, suggested JP Morgan would seek to monitor these competitors – and outpace them.

“We need to acknowledge our own flaws … Rest assured, we analyse all of our competitors in excruciating detail – so we can learn what they are doing and develop our own strategies accordingly.”

And by the first half of this year, JP Morgan was reported to have invested as much as US$9 bil in cryptocurrency technologies like the blockchain distributed ledger and public key cryptography, following the footsteps of other banks like Barclays, Citigroup and Goldman Sachs.

Interestingly, JPMorgan is a founding member of the Enterprise Ethereum Alliance, launched in February, which hopes to create an open-source blockchain standard around the technology for the business world.

It has gained more than 200 members in less than a year – including a number of Fortune 500 companies, with household names like BP, MasterCard, Intel, and Microsoft sitting side by side with cryptocurrency-focused organisations like talkcrypto.org, CoinFund, and iExec, along with a handful of banks and educational entities.

Thus, it is incredulous and mind boggling for Dimon to say that bitcoin is a fraud but at the same time sees potential in blockchain, the technology behind “fraud” bitcoin.

On Oct 13, JPMorgan launched a blockchain-based system with two other banks to reduce global payment transaction speeds “from weeks to hours”. Blockchain creates a quick, permanent and transparent record of transactions, eliminating the need for third party verification.

When the pseudonymous Satoshi Nakamoto conceptualised the first distributed blockchain in 2008, and later implemented it in 2009 as a core component of the digital currency bitcoin, where it serves as the public ledger for all transactions, trust in the ability of governments and banks to manage the economy and the money supply was at its lowest. This is in the aftermath of the sub-prime mortgage crisis also known as the Great Recession of 2008.

In this regard, Dimon does not stand on a moral high ground to declare bitcoin is a fraud when he himself has presided over the largest sanctions ever levied against JPMorgan – somewhere between US$2.6 bil it agreed to pay in 2014 for allegedly failing to stop Bernard Madoff’s Ponzi scheme, and a US$13 bil settlement it reached with government authorities in 2013 for its handling of mortgage bonds that fueled the financial crisis, as reported by Bloomberg.

Perhaps his schizophrenic statement on bitcoin and blockchain technology is a sign that he could already see the future in which banks like his do not stand a chance to be in its current, entrenched position and maybe eclipsed by fintech companies which are now startups and may play a dominant role in the banking and finance sector of the future with their disruptive technologies.

Whatever his motivation in declaring bitcoin as a fraud, he will make an interesting subject of study by the financial psychologists.

Now back to the China’s ban on ICO. The article below will highlight what’s behind the ban and the lessons from Singapore whose reaction to ICO can only be described as cool, collected and sensible.

It does not dramatise the rapid rise in the price of bitcoin as worse than tulip bulbs simply because it must have realised that 99.9% of the world population are still ignorant of the existence of crypto currencies. So how can the 0.1% cause a financial contagion with the volatility in price? Read on …

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Mixed blessings of ICOs

 By Jamari Mohtar

Across the Straits

Focus Malaysia | Oct 21, 2017

When China finally made the anticipated move against Initial Coin Offerings (ICOs) in September, followed by some other countries, the doomsayers were up on their feet, predicting gleefully on an impending epic crash of crypto currencies especially bitcoins.

One professor of economics sent me a Bloomberg article on JPMorgan Chase’s CEO Jamie Dimon saying bitcoin “is a fraud”, while a friend who was a former professor of economics with characteristic nonchalance messaged me, saying bitcoin is worse than tulip bulbs.

Then came the news that Bank Negara Malaysia (BNM) is mulling whether to ban cryptos by year’s end, and all smart-alecs went on overdrive in raving and ranting in a holier-than-thou fashion of “I told you so”, until I have to point out the fact the decision will be made later shows cryptos are currently not banned in Malaysia.

These people were barking up the wrong tree. The culprit is ICO but bitcoin gets the blame when in actual fact the famous crypto was never created through an ICO. Instead of an epic fall, it only fell 46% to US$2,981, days after Dimon’s comments on Sep 13 – a pattern already repeated several times this year, some with a more than 50% fall. But it has since recovered to its previous high in early October – another repeated pattern – and is now trading at about US$5,674 as of Oct 16.

What’s behind the China ban?

What we’ve seen in China is the proliferation of start-up companies or projects issuing digital currency tokens that were supposedly backed by the prospect of future technological innovations, which turned out to be dubious innovations and basically cashing in on this ICO craze. These are nothing more than scams.

The worst part is when ICOs were used to raise funds by creating digital tokens that are strictly not cryptos because of the absence of block chain distributed ledger and public key cryptography in their creation. Here’s a simple rule: Cryptos are digital monies but not all digital monies are cryptos unless they are “embedded” with the block chain and public key cryptography.

Take the case of the US dollars. At last count, there’s more than US$13.5 tril in existence. But the US Federal Reserve says only US$1.5 tril exists as actual paper notes, which means nearly 90% of all US dollars in the world exist as “digits on a screen” – digital monies not of the crypto kind.

And the Fed creates most of it out of thin air, which they can’t do with cryptos. You may remember quantitative easing (QE) used by the Fed to jump-start the economy and stimulate it. Most people think of it as a massive money-printing operation, but the Fed actually didn’t print any money. It just added a few digits to its balance sheet.

The QEs had depressed interest rate to almost zero which caused a global debt-spending spree that in turn caused asset price bubble, thus postponing complete recovery till today.

This low interest rate regime prompted investors to seek a better rate of return and when they saw prices of cryptos went up by leaps and bounds, the crypto craze was born. That was last year.

Hence, when US$400 mil has been raised in China so far on the ICO platform, the People’s Bank of China came out and said, “Look, enough is enough. This is out of control. We’re putting a complete ban on ICOs.”

Lessons from Singapore

Singapore has the uncanny ability to “smell” emerging technologies that will become mainstream when these were still in their infancy and are not on the lips of other governments.

Since independence, the city-state has made the art of futurology a science. Also known as strategic foresight, futurology is the study of postulating possible, probable, preferable or alternative futures, and the worldviews and myths that underlie them.

Tools of strategic thinking like scenario planning and terrain mapping are often used in this field. Also employed is the methodology called emerging issues analysis which searches for the drivers of change, issues that are likely to move from unknown to the known, and from low to high impact.

This has resulted in the city-state having a competitive advantage of being, most often than not, a first mover in applying new technologies.

The country’s pro-business policy is well known but what is seldom known is its love for for start-up companies that have the potential to, metaphorically speaking, lay the golden eggs. Thus, they will be treated like a “pampered” child so as to help them focus their mind on their innovative spirit to discover technologies that will be beneficial to mankind.

I first discovered this when writing that Bitcoin “rolled” in Singapore in FocusM in 2014. The focus of the news then was on the island-state being the first country in Asia to roll out the Bitcoin ATM and its stance on bitcoin being not a legal tender in the country and will remain unregulated. What caught my attention then was that a local startup was the manufacturer of the Bitcoin ATM machine itself. It had created a mania when it first made an appearance in Europe and the US.

My article and a subsequent one showed Singapore had already become a hub for crypto currency technologies in 2014. This means it had already positioned itself as a hub way back before 2014 when words like blockchain or peer-to-peer network were seldom heard. This also means the process of applying futurology that led to this decision was even made much earlier, probably in 2010.

Cool and collected

This explains why its response towards the ICOs is cool, collected and sensible. It does not dramatise the rapid rise in the price of bitcoin as worse than tulip bulbs simply because it must have realised that 99.9% of the world population are still ignorant of the existence of crypto currencies. So how can the 0.1% cause a financial contagion with the price volatility?

As for ICO, start-ups need funding for their innovative projects because they do not have the track record to apply for funding under a highly regulated Initial Public Offering (IPO), and the sole avenue open for them in this regard is the costly venture capitalists’ funding.

Singapore appreciates the innovative spirit of ICO, which strictly speaking resembles crowd funding, and hence it adopts a targeted approach to improving ICO with existing, not new, legislation by making any tokens that have the characteristics of securities come under the Securities and Futures Act.

On the exponential rise in value of some cryptos, the republic’s Deputy Prime Minister, Tharman Shanmugaratnam, said “as a financial regulator, MAS’ focus is securitised interests in assets – such as shares in a company”. The Monetary Authority of Singapore (MAS) “does not and cannot regulate all products that people put their money in thinking that they will appreciate in value”.

“But recognising the risks of investing in virtual currencies are significant, MAS and the Commercial Affairs Department have published an advisory alerting consumers to these risks, and are working together to raise public awareness of potential scams,” added Tharman to queries on virtual currency in a parliamentary sitting on Oct 3, the day BNM announced it was considering banning cryptos.

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

Encouraging innovation via regulatory sandbox

 

Screen Shot 2017-10-13 at 4.42.44 PM

By Jamari Mohtar

Across the Straits

Focus Malaysia | Oct 14, 2017

As the saying goes, necessity is the mother of invention. But in today’s world of financial technology (fintech), a more apt proverb would be “sandbox is the father of innovation”. It’s high time the father gets recognition too!

Who would have thought that a child’s play area – the sandbox – would become the buzzword for financial regulators to encourage innovations in fintech that will make their country a smart financial centre, which in turn is a subset of a smart nation.

As the fintech industry continues to grow, regulators around the globe are starting to sit up and take notice. Over the last one and half years, a new trend in financial services regulation – the regulatory sandbox – has emerged.

Britain was the first to launch the regulatory sandbox in May last year. Since then, regulators in, among others, Singapore, Hong Kong, Switzerland, Thailand, Abu Dhabi, Australia, Canada and Lithuania have adopted similar frameworks. Not to be outdone by a pre-Brexit UK, the European Union (EU) is contemplating proposals for a possible regulatory sandbox.

I first heard about this sandbox thingy from my Singaporean lawyer friends in the course of our discussion on the inadequacy of the current laws to cope with crypto currencies, smart contract, block chain technology and Initial Coin Offering because of the disruptive nature of all these phenomena.

When it comes to regulatory sandbox, Singapore is on the ball when the Monetary Authority of Singapore (MAS) launched it in June last year, just a month after Britain.

The rationale for launch is that emerging financial products or services are becoming more sophisticated and there may be uncertainty over whether the innovation meets regulatory requirements.

Where it is less clear whether a new financial product or service complies with legal and regulatory requirements, some financial institutions (FIs) or start-ups may err on the side of caution and choose not to implement it. Thus promising innovations may be stifled and opportunities missed.

Hence, MAS is encouraging more fintech experimentation so that promising innovations can be tested in the market and have a chance for wider adoption in Singapore and abroad.

Regulatory sandbox will enable FIs as well as fintech players to experiment with innovative financial products or services in the production environment but within a well-defined space and duration. It shall also include appropriate safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system.

Sandbox is a concept borrowed by regulators from the world of software development. It enables developers to test a technological proof of concept prior to a full-scale public release, and provides a firm with the ability to amend and improve products iteratively based on feedback, and before the firm has invested significant retrospective costs in a project.

Experiment with real customers

 In a regulated sector such as financial services, this iterative approach can be difficult for firms to replicate, especially for startups, which usually do not have regulatory permissions that are needed to conduct real-world tests.

By allowing new firms to experiment with real customers in a regulatory sandbox, regulators are hoping to eliminate some of the temptations for firms to rely on loopholes or an aggressive reading of financial services rules in order to avoid the scope of regulation in their testing phase.

Hence, the sandbox is designed to create a “safe space” where firms can enter the financial services market and generate new ideas within a flexible regulatory control and support.

Such regulatory sandboxes may not only attract start-up firms, but also may be useful for more established market players which are considering launching innovative new products that do not fall within the framework of existing financial services regulation. These include larger firms in the banking, payment services and asset management sectors

In November last year, MAS issued guidelines along with a template application form for applicants who intend to take part in a regulatory sandbox.

There is no limit to the number of firms that can join the MAS’ sandbox. The regulator will publish the name of a successful applicant, along with the start and expiry dates of the sandbox.

MAS aims to make Singapore a smart financial centre by promoting the use of innovative and safe technology in the financial sector. The objective is to encourage more fintech experimentation within a well-defined space and time where MAS will provide the requisite regulatory support so as to increase efficiency, manage risks better, create new opportunities and improve people’s lives.

When a company applies for participating in the regulatory sandbox, MAS will ask whether:

  • Its fintech idea is similar to existing solutions in Singapore;
  • Applicant does not do due diligence to test and verify the viability of its fintech solution;
  • it is sufficient to reasonably and effectively experiment with the solution in a laboratory or test environment; and
  • applicant does not have the intention to deploy the fintech solution in the city-state more broadly after exiting the sandbox.

If the answer to all the above questions is in the affirmative, the application will be rejected. But if all the answers are in the negative, MAS will have a further six evaluation criteria in finally accepting an application based on:

  • Solution is technologically innovative;
  • Solution addresses a problem or brings clear benefits to consumers;
  • Test scenarios and outcomes clearly defined;
  • Boundary conditions defined for example sample set of 50 customers;
  • Major forseeable risks arising from fintech idea have been assessed and mitigated; and
  • There is an exit strategy in the event the solution is not feasible.

Customers beware

The successful sandbox company will have to clearly inform customers that it is operating in the sandbox; disclose the key risks associated with the product or service, as these relate to non-delivery or underperformance; and customers will need to acknowledge that they have read and understood these risks.

Meanwhile, MAS through MoneySense, which is a national financial education programme for Singapore, has advised Singaporeans who are thinking about purchasing a product or engaging the services of a company that is operating in the sandbox to be aware, among others, that the company is not required to comply with some of the usual regulatory requirements imposed for providing financial products and services to customers.

Also, by participating in any sandbox experiment, consumers may not be able to seek help from consumer protection schemes or the deposit insurance scheme/policy owners’ protection scheme.

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

 

Secebis sejarah Bitcoin

Found this bit of history on bitcoin as I was surfing in cyberspace. The author was Benjamin Wallace and the article was written in 2011. Not sure though in what publication it appears.

Decided to translate it into Malay. Just for the fun of practising translation because as they say, practice makes perfect.

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Secebis sejarah Bitcoin

Oleh Benjamin Wallace | 2011

PADA 1 November 2008, seorang lelaki bernama Satoshi Nakamoto telah menyiarkan kertas kajian kepada listserv yang terdiri daripada para peminat kriptografi. Listserv adalah sebuah applikasi yang menyebarkan mesej kepada para pelanggan dalam senarai mel elektronik. Kertas kajian itu menggariskan gagasan Nakamoto untuk melahirkan mata wang digital baru yang dipanggil bitcoin.

Tiada seorang pun di kalangan veteran kriptografi dalam senarai mel elektronik tersebut pernah mendengar tentang Nakamoto, dan maklumat jelas mengenainya adalah begitu kabur dan saling bercanggah. Dalam profil dalam talian (online profile), beliau menyatakan yang beliau tinggal di Jepun. Alamat e-melnya pula adalah dari penyedia khidmat Jerman yang ditawarkan secara percuma. Carian Google untuk namanya tidak mempunyai maklumat yang relevan; ia jelas merupakan nama samaran (pseudonym).

Tetapi sementara siapakah Nakamoto itu sendiri telah menjadi satu teka-teki, ciptaannya telah dapat menyelesaikan masalah yang senantiasa membelenggu para ahli kriptografi selama beberapa dekad sebelum ini. Gagasan mengenai wang digital – memudahkan dan tidak boleh dikesani serta bebas dari pengawasan kerajaan dan bank – telah menjadi topik hangat sejak kelahiran Internet. Cypherpunks, sebuah gerakan ahli-ahli kriptografi yang mendukung kebebasan (libertarian) pada tahun 1990an, telah mencurahkan tenaga dengan penuh dedikasi untuk menjayakan projek tersebut.

Namun, setiap usaha untuk mencipta wang tunai maya telah gagal. Ecash, sistem anonim yang dilancarkan pada awal tahun 1990an oleh ahli kriptografi David Chaum, gagal, kerana sebahagian sebab kegagalannya adalah ia bergantung pada infrastruktur kerajaan yang sedia ada dan syarikat kad kredit. Cadangan lain menyusuli dan ini termasuk bit gold, RPOW, b-money – tetapi kesemuanya gagal untuk menjadi kenyataan.

Salah satu cabaran utama untuk mewujudkan mata wang digital melibatkan sesuatu yang dipanggil permasalahan berbelanja dua kali. Sekiranya dolar digital hanyalah semata-mata maklumat, bebas dari sifat kertas dan logam, apa yang menghalang seseorang daripada menyalin dan menampalkannya (copy and paste) dengan mudah seperti sepotong teks, kemudian “membelanjakannya” seberapa banyak yang mereka mahu? Jawapan konvensional melibatkan penggunaan rumah penjelasan pusat (central clearinghouse) untuk menyimpan lejar (ledger) masa sebenar semua urus niaga – memastikan jika seseorang menghabiskan dolar digitalnya yang terakhir, dia tidak boleh membelanjakannya lagi.

Walaupun lejar boleh membendung penipuan, namun ia tetap memerlukan pihak ketiga yang dipercayai (trusted third party) untuk mentadbir dan memantaunya. Dengan adanya bitcoin, khidmat dan pemantauan pihak ketiga tersebut tidak lagi diperlukan kerana lejar itu akan diagihkan secara awam, apa yang Nakamoto sebut sebagai “rantaian blok.” Pengguna yang bersedia menumpukan kuasa CPU untuk menjalankan perisian (software) komputer khas akan dipanggil pelombong (miners) dan akan membentuk rangkaian untuk menyenggarakan rantaian blok (blok chain) secara kumpulan. Dalam proses ini, mereka juga akan menjana mata wang baru.

Kesemua urus niaga akan disiarkan ke rangkaian, dan komputer yang menjalankan perisian akan bersaing untuk menyelesaikan teka-teki kriptografi yang mengandungi data dari beberapa urus niaga. Pelombong pertama yang dapat menghuraikan setiap teka-teki akan diberikan 50 bitcoin baru, dan blok urus niaga yang berkaitan itu akan ditambah ke rantai. Tahap kesukaran setiap teka-teki akan meningkat sebaik saja bilangan pelombong meningkat, yang akan mengekalkan pengeluaran ke satu blok urus niaga sekitar setiap 10 minit.

Di samping itu, saiz ganjaran menghuraikan teka-teki akan berkurangan dengan separuh bagi setiap 210,000 blok – bermula dengan 50 hingga 25, kemudian 25 hingga 12.5, dan sebagainya. Sekitar tahun 2140, mata wang bitcoin itu akan mencecah had yang ditetapkan oleh Nakamoto sebanyak 21 juta bitcoin.

Apabila kertas kajian Nakamoto muncul pada tahun 2008, kepercayaan awam terhadap keupayaan kerajaan dan bank untuk menguruskan ekonomi dan bekalan wang berada di tahap yang paling rendah. Pemerintah Amerika Syarikat (AS) telah membelanjakan dolar di Wall Street dan syarikat kereta Detroit. Bank Pusat Amerika (The Fed) memperkenalkan “pelonggaran kuantitatif” (quantitative easing) yang pada asasnya adalah dasar mencetak wang untuk merangsang ekonomi. Harga emas naik. Bitcoin tidak memerlukan kepercayaan kepada ahli politik atau pembiaya yang telah merosakkan ekonomi – ia hanya kepercayaan dengan algoritma anggun ciptaan Nakamoto.

Lejar awam bitcoin dilihat sebagai bukan saja dapat mengelakkan penipuan, malahan juga pengeluaran bekalan wang digital itu telah ditentukan terlebih dahulu agar ia tumbuh pada kadar yang dijangkakan, lantas tidak dipengaruhi langsung oleh bank pusat atau menyebabkan kadar inflasi yang terlalu tinggi. Nakamoto sendiri melombong 50 bitcoin pertama – yang dikenali sebagai blok genesis pada 3 Januari 2009.

Selama setahun lebih, ciptaannya itu menjadi tumpuan sekumpulan kecil para kriptografi yang berada dalam senarai pelanggan mel elektroniknya. Tetapi perlahan-lahan, berita mengenai bitcoin merebak di luar dunia kriptografi. Ia telah mendapat banyak penghargaan daripada beberapa penyokong terkemuka gagasan wang digital. Wei Dai, pencipta b-money, menyifatkan bitcoin sebagai “sangat penting”; Nick Szabo, yang mencipta bit gold memuji bitcoin sebagai “sumbangan besar kepada dunia”; dan Hal Finney, ahli kriptografi terkemuka dalam penciptaan RPOW, mengatakan ia “berpotensi mengubah dunia.” Yayasan Sempadan Elektronik, pertubuhan yang menyokong kuat konsep privasi digital (digital privacy), akhirnya mula menerima derma dalam mata wang alternatif itu.

Kumpulan kecil perintis bitcoiners tersebut semuanya berkongsi semangat kemasyarakatan (communitarian spirit) yang mirip dengan kumpulan masyarakat projek perisian sumber terbuka (open source software project). Gavin Andresen, seorang pengkod di New England, membeli 10,000 bitcoin dengan harga $50 dan membuat sebuah laman web yang dipanggil Bitcoin Faucet yang melaluinya beliau memberikan bitcoin secara percuma. Laszlo Hanyecz, seorang pemrogram komputer Florida, mengendalikan apa yang disifatkan oleh masyarakat bitcoiner sebagai urus niaga bitcoin yang pertama di dunia, dengan membayar 10,000 bitcoin untuk mendapatkan dua buah pizza yang dihantar dari Papa John. (Dia menghantar bitcoin kepada sukarelawan di England, yang kemudiannya memanggil pesanan kad kredit secara merentas dunia.) Seorang petani di Massachusetts bernama David Forster mula menerima bitcoin sebagai bayaran untuk stokin alpaca.

Apabila mereka dapat meluangkan  masa dari kegiatan perlombongan, kumpulan bitcoiners itu cuba menghuraikan misteri lelaki yang mereka kenal hanya dengan nama Satoshi. Pada saluran IRC bitcoin, ada yang menyebut bahawa dalam bahasa Jepun Satoshi bermaksud “bijak.” Ada juga yang tertanya-tanya sama ada nama tersebut adalah singkatan bagi empat syarikat teknologi mapan: SAmsung, TOSHIba, NAKAmichi, dan MOTOrola. Namun terdapat keraguan bahawa Nakamoto semestinya orang Jepun. Bahasa Inggerisnya mempunyai kesempurnaan simpulan bahasa seorang pembicara asli bahasa Inggeris.

Ada pendapat yang menyatakan Nakamoto bukan seorang lelaki tetapi kumpulan misteri dengan tujuan tersembunyi – mungkin pasukan di Google atau Agensi Keselamatan Negara. “Saya beremel dengan orang yang dikatakan sebagai Satoshi,” kata Hanyecz, yang berada dalam pasukan perintis pemaju teras bitcoin untuk seketika. “Saya selalu mendapat gambaran bahawa ia bukan orang sebenar. Saya akan mendapat balasan jawapan mungkin setiap dua minggu, seolah-olah orang itu akan menyemak emelnya sekali-sekala. Bitcoin seolah-olah boleh direka dengan baik dan dasyatnya untuk seorang saja melahirkannya.”

Nakamoto mendedahkan sedikit tentang dirinya sendiri, menghadkan perbualan dalam taliannya untuk perbincangan teknikal mengenai kod sumbernya. Pada 5 Disember 2010, selepas kumpulan perintis bitcoiners itu mula berurusan dengan Wikileaks agar ia menerima sumbangan dalam bentuk bitcoin, Nakamoto yang biasanya terlalu ringkas dan tegas dalam emelnya telah memberi pandangan yang agak berlainan dari wataknya: “Tidak, jangan berurusan dengan Wikileaks dalam bentuk bitcoin,” tulisnya dalam jawapan kepada forum bitcoin. “Projek perlu berkembang secara perlahan supaya perisian dapat diperkuat di sepanjang perjalanan. Saya membuat rayuan kepada Wikileaks untuk tidak menggunakan bitcoin. Bitcoin adalah komuniti beta kecil dalam peringkat awalnya. Anda tidak akan mendapat lebih banyak daripada pertukaran duit saku (pocket change), dan kepanasan yang anda bawa akan berkemungkinan memusnahkan kami pada peringkat ini.”

Kemudian, sepertimana kemunculannya secara mengejut dan tidak disangka-sangka itu, Nakamoto melenyapkan dirinya. Pada 6.22 petang GMT pada 12 Disember, tujuh hari selepas menyatakan pandangannya mengenai Wikileaks, Nakamoto menyampaikan mesej terakhirnya kepada forum bitcoin, mengenai beberapa masalah dalam versi terkini perisian. Maklum balas e-melnya menjadi lebih tidak menentu, kemudian berhenti sama sekali.

Andresen, yang telah mengambil alih peranan pemaju utama, kini nampaknya merupakan salah seorang daripada segelintir yang Nakamoto masih berkomunikasi. Pada 26 April, Andresen memberitahu rakan-rakannya: “Satoshi mencadangkan pagi ini bahawa saya (kami) harus cuba tidak menonjolkan keseluruhan perkara mengenai ‘pengasas misteri’ ketika bercakap secara terbuka mengenai bitcoin.” Kemudian Nakamoto berhenti menjawab walaupun kepada e-mel Andresen. Kumpulan perintis bitcoiners itu tertanya-tanya mengapa dia telah meninggalkan mereka. Tetapi dalam pada masa yang sama, ciptaannya itu telah mempunyai kewujudannya yang tersendiri.

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A brief history on the origin of bitcoin

By Benjamin Wallace | 2011

In November 1, 2008, a man named Satoshi Nakamoto posted a research paper to an obscure cryptography listserv describing his design for a new digital currency that he called bitcoin.

None of the list’s veterans had heard of him, and what little information could be gleaned was murky and contradictory. In an online profile, he said he lived in Japan. His email address was from a free German service. Google searches for his name turned up no relevant information; it was clearly a pseudonym.

But while Nakamoto himself may have been a puzzle, his creation cracked a problem that had stumped cryptographers for decades. The idea of digital money—convenient and untraceable, liberated from the oversight of governments and banks—had been a hot topic since the birth of the Internet. Cypherpunks, the 1990s movement of libertarian cryptographers, dedicated themselves to the project. Yet every effort to create virtual cash had foundered. Ecash, an anonymous system launched in the early 1990s by cryptographer David Chaum, failed in part because it depended on the existing infrastructures of government and credit card companies. Other proposals followed—bit gold, RPOW, b-money—but none got off the ground.

One of the core challenges of designing a digital currency involves something called the double-spending problem. If a digital dollar is just information, free from the corporeal strictures of paper and metal, what’s to prevent people from copying and pasting it as easily as a chunk of text, “spending” it as many times as they want? The conventional answer involved using a central clearinghouse to keep a real-time ledger of all transactions—ensuring that, if someone spends his last digital dollar, he can’t then spend it again.

The ledger prevents fraud, but it also requires a trusted third party to administer it. Bitcoin did away with the third party by publicly distributing the ledger, what Nakamoto called the “block chain.” Users willing to devote CPU power to running a special piece of software would be called miners and would form a network to maintain the block chain collectively. In the process, they would also generate new currency.

Transactions would be broadcast to the network, and computers running the software would compete to solve irreversible cryptographic puzzles that contain data from several transactions. The first miner to solve each puzzle would be awarded 50 new bitcoins, and the associated block of transactions would be added to the chain. The difficulty of each puzzle would increase as the number of miners increased, which would keep production to one block of transactions roughly every 10 minutes. In addition, the size of each block bounty would halve every 210,000 blocks—first from 50 bitcoins to 25, then from 25 to 12.5, and so on. Around the year 2140, the currency would reach its preordained limit of 21 million bitcoins.

When Nakamoto’s paper came out in 2008, trust in the ability of governments and banks to manage the economy and the money supply was at its nadir. The US government was throwing dollars at Wall Street and the Detroit car companies. The Federal Reserve was introducing “quantitative easing,” essentially printing money in order to stimulate the economy. The price of gold was rising. Bitcoin required no faith in the politicians or financiers who had wrecked the economy—just in Nakamoto’s elegant algorithms. Not only did bitcoin’s public ledger seem to protect against fraud, but the predetermined release of the digital currency kept the bitcoin money supply growing at a predictable rate, immune to printing-press-happy central bankers and Weimar Republic-style hyperinflation.

Nakamoto himself mined the first 50 bitcoins—which came to be called the genesis block—on January 3, 2009. For a year or so, his creation remained the province of a tiny group of early adopters. But slowly, word of bitcoin spread beyond the insular world of cryptography. It has won accolades from some of digital currency’s greatest minds. Wei Dai, inventor of b-money, calls it “very significant”; Nick Szabo, who created bit gold, hails bitcoin as “a great contribution to the world”; and Hal Finney, the eminent cryptographer behind RPOW, says it’s “potentially world-changing.” The Electronic Frontier Foundation, an advocate for digital privacy, eventually started accepting donations in the alternative currency.

The small band of early bitcoiners all shared the communitarian spirit of an open source software project. Gavin Andresen, a coder in New England, bought 10,000 bitcoins for $50 and created a site called the Bitcoin Faucet, where he gave them away for the hell of it. Laszlo Hanyecz, a Florida programmer, conducted what bitcoiners think of as the first real-world bitcoin transaction, paying 10,000 bitcoins to get two pizzas delivered from Papa John’s. (He sent the bitcoins to a volunteer in England, who then called in a credit card order transatlantically.) A farmer in Massachusetts named David Forster began accepting bitcoins as payment for alpaca socks.

When they weren’t busy mining, the faithful tried to solve the mystery of the man they called simply Satoshi. On a bitcoin IRC channel, someone noted portentously that in Japanese Satoshi means “wise.” Someone else wondered whether the name might be a sly portmanteau of four tech companies: SAmsung, TOSHIba, NAKAmichi, and MOTOrola. It seemed doubtful that Nakamoto was even Japanese. His English had the flawless, idiomatic ring of a native speaker.

Perhaps, it was suggested, Nakamoto wasn’t one man but a mysterious group with an inscrutable purpose—a team at Google, maybe, or the National Security Agency. “I exchanged some emails with whoever Satoshi supposedly is,” says Hanyecz, who was on bitcoin’s core developer team for a time. “I always got the impression it almost wasn’t a real person. I’d get replies maybe every two weeks, as if someone would check it once in a while. Bitcoin seems awfully well designed for one person to crank out.”

Nakamoto revealed little about himself, limiting his online utterances to technical discussion of his source code. On December 5, 2010, after bitcoiners started to call for Wikileaks to accept bitcoin donations, the normally terse and all-business Nakamoto weighed in with uncharacteristic vehemence. “No, don’t ‘bring it on,’” he wrote in a post to the bitcoin forum. “The project needs to grow gradually so the software can be strengthened along the way. I make this appeal to Wikileaks not to try to use bitcoin. Bitcoin is a small beta community in its infancy. You would not stand to get more than pocket change, and the heat you would bring would likely destroy us at this stage.”

Then, as unexpectedly as he had appeared, Nakamoto vanished. At 6:22 pm GMT on December 12, seven days after his Wikileaks plea, Nakamoto posted his final message to the bitcoin forum, concerning some minutiae in the latest version of the software. His email responses became more erratic, then stopped altogether.

Andresen, who had taken over the role of lead developer, was now apparently one of just a few people with whom he was still communicating. On April 26, Andresen told fellow coders: “Satoshi did suggest this morning that I (we) should try to de-emphasize the whole ‘mysterious founder’ thing when talking publicly about bitcoin.” Then Nakamoto stopped replying even to Andresen’s emails. Bitcoiners wondered plaintively why he had left them. But by then his creation had taken on a life of its own.

Lee’s Art of Governance

 

By Jamari Mohtar

Across the Straits

Focus Malaysia, Sep 23, 2017

Art of Governance

If you want to see the art of governance in action, watch the annual National Day Rally (NDR) speech of Singapore’s prime minister Lee Hsien Loong every August.

In that speech, he will give a general report card on Singapore, lay out some policy prescriptions of immediate priorities that will soon be implemented, freely admitting the inadequacy of some measures that had been implemented and share his views on some pertinent long-term challenges facing the republic, which keep Singaporeans in tune with what to expect in the future.

Analysts say that the NDR is the equivalent of the annual State of Union Address of a US president. But the US version in my view is so officious, so proper and so paternalistic that it looks like the president is talking down on the members of Congress.

Just compare and contrast Obama’s State of Union Address with his acceptance speeches during the National Democratic Party Convention in 2008 and 2012. At the Convention, he spoke with candour, light heartedly and peppered his speech with humour, even for serious issues.

He admonished, cajoled and pleaded his case in a conversational style not only to his Democrats’ constituents at the convention but also Americans at large. He did not talk down but rather level with them.

The NDR is like the Convention’s speeches of Obama with three differences – the latter can be seen as opportunistic because it is election time whereas Lee’s NDR is free from election gimmicks; Lee is a veteran at it, having been the PM for 13 years while Obama had only two shots at delivering his acceptance speeches because of term limit; and the live audience of Obama comprises Democratic politicians and their supporters, whereas in the case of NDR, a cross-section of Singaporeans from the mighty to the ordinary, like the taxi driver, are invited as the live audience.

I can’t help laughing at the way the Singapore premier used humour to convey the important message of what more needs to be done in the serious business of safeguarding the country from terrorists’ threat during his NDR speech on August 20.

“We are making ‘every lamppost a smart lamppost’.” Hearing it out of context, you may wonder how else can one make a naturally dumb lamppost smarter, and thereby may conclude that this is the famous kiasu-ness of Singaporeans exhibited at the highest level.

However, seeing it in the proper context of his speech it means he is creating an awareness of what the drive towards the goal of a Smart Nation entails by drawing their attention to the following:

  • Admission of the mistake of not bringing all the different systems of the country’s network of sensors together by making them “talk” to each other, despite the natural advantage of the republic’s compactness, high connectivity and digitally literate population; and
  • Open-mindedness of accepting a criticism that despite a reputation as one of the safest cities in the world, other cities were ahead of Singapore when it came to using IT to make a city safe.

The city-state’s pioneering network of sensors began some time ago when the Public Utilities Board installed sensors to detect water levels in drains to predict the likelihood of flood; the Land Transport Authority’s cameras to monitor traffic conditions and deter illegal parking; the CCTV systems of hotels, shopping centres and office buildings; and the police’s CCTVs at the Housing Development Board’s void decks and lift landings to deal with loan sharks.

“And it has worked. We see fewer cases of “owe-money-pay-money” now. They do not paint your door but I just read in the newspapers the “owe-money-pay-money” has gone online now. But at least the physical harassment is down. Residents are greatly relieved,” Lee said.

Singapore paid a heavy price on this slackness of not making the different systems of sensors to integrate with each other when the Little India riot of Dec 2013 occurred with the authorities being caught a little flat-footed – the first riot since the early 1960s.

Since then progress has been made and Singapore is now building an integrated national sensor network in which “every lamppost is a smart lamppost” where it can mount different types of sensors.

The novelty of a smart lamppost lies in the analysis of the combined data yielded by each lamp post by using artificial intelligence (AI) to automatically flag when something unusual is happening.

“So if I have 10,000 cameras, I do not need 1,000 people watching those cameras. I need maybe just 10 people. Each person can watch 1,000 cameras and if the AI detects that something funny is happening, it will pop up and the man can pay attention and a response can be directed. So one day if we have an incident like the Boston Bombings, then the Home Team can assess the situation quickly and respond promptly, or even pre-empt it from happening,” added Lee.

Another instance of technology not “talking” to each other highlighted by Lee is in electronic payments. Citing China as the most advanced with e-payments, he shared a story on how a Singapore cabinet minister was caught “flat footed” in China when he wanted to pay cash for chestnuts from a roadside hawker. The hawker rejected the cash, gave the minister a quizzical look and pointed to a QR code for WeChat Pay.

In the major Chinese cities, cash has become obsolete, even debit and credit cards are becoming rare. Everyone is using WeChat Pay or AliPay and these apps are linked to one’s bank account. To pay someone money, you just use your hand phone, scan QR Code of that someone and voila, the payment is effected. And these apps can be used for nearly all payments.

“So when visitors from China find that they have to use cash here, they ask: how can Singapore be so backward?” quipped the prime minister.

In Singapore, with too many different schemes and systems of e-payments that do not talk to one another, people have to carry multiple cards and businesses have to install multiple readers – inconvenient for consumers and costly for businesses. As a result, most Singaporeans still prefer the use of cash and cheques – six in ten transactions are in cash and cheques.

A single unified card reader

But with the Monetary Authority of Singapore (MAS) having simplified and integrated the different systems into one, the city-state now has one single unified terminal that can read different cards.

MAS and the banks have also rolled out a new service since July 10, called PayNow that links mobile phone number to bank account which is basically a peer-to-peer funds transfer service.

Lee explained this very simply: “So you use your app you send $20, you know his phone number, you send it to him, it pops up on his account. It is done. Different bank, notwithstanding, money goes across. Does not matter if the bank is different.

“In fact, you do not have to know his bank account number, or which bank he is using. Soon you will be able to use QR codes too. It is convenient, it is cheap. It is safe. There is no credit card fee. So next time I am at a hawker centre, I look forward to paying for my meal with PayNow. Then I will know it is fully working.”

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

The Day of Arafah: The impact of calendars on rites of worship

By Jamari Mohtar

IN ISLAM, a new day begins on the onset of Maghrib when the sun sets. It’s a time when people are still wide-awake and starting to chill out after a long day at work. It’s an occasion for relaxing and spending quality time with members of the family whom you’ve not seen the whole day because of your work commitments. Muslims welcome a new day with the Maghrib prayer.

Contrast this with a new day in the Gregorian system. Many people, even those in the West, thought a new Gregorian day begins when they first open their eyes in the morning at about 6 or 7 after a restful six to eight hours of sleep.

In actual fact, a new day in the Gregorian system begins at midnight when the majority of people on earth are in a deep comatose sleep – what a way to welcome a new day!

Of course the exception will be those owlish people or musang (fox) folks as they are called in our part of the world (some say they are like Musang King – a class of branded durian, ahem!). They will be wide-awake to welcome the Gregorian new day, as they stay alive and kicking all night long to the beat of Lionel Ritchie’s song.

That is why in Islam, all festivals begin a day before their allotted time in the Gregorian calendar, when the sun sets in line with this concept of a new day taking place as the sun sets.

Take the case of Eidul Adha (Feast of the Sacrifice) known as Hari Raya Haji in the Southeast Asian region. If you look at your Gregorian calendar, Sep 1, 2017 is listed as Hari Raya Haji, along with a small print of 10 Zulhijjah, which denotes its counterpart in the Hijriah taqwim (Islamic calendar).

This is not exactly correct because a part of the previous day i.e. 31 August (the part after the sun has set) is actually the start of 10 Zulhijjah and that’s why the Takbeer Muqayyad (takbeer after the five daily prayers at the mosque) for Eidul Adha began on August 31 after the Maghrib prayer.

Apart from this difference on the start of a new day, the other confusion when discussing the differences between the Gregorian and Islamic calendars lies with the meaning of the word ‘day’.

A day in its narrow sense means a time period, which starts when the sun rises (brightness) and ends with the setting of the sun (darkness). It is roughly a 12-hour time interval. The other 12-hour interval begins with darkness and ends with brightness, or what we call night.

But a day in its broad sense could also mean the whole day encompassing both night and day – a 24-hour interval. This distinction between a narrow day (12-hour interval) and a broad day (24-hour interval) must always be kept in mind, otherwise you won’t be able to follow the subsequent arguments in the following paragraphs of this article.

Our familiarity with the Gregorian calendar – the only calendar most of us have known since our birth – has sometimes caused some confusion about some aspects of Islamic worship that is based on the Hijriah taqwim.

But before going into this confusion, let’s first pose a question – why does the Islamic calendar begin a new day (day as in the 24-hour interval) at night?

The answer is simply the Hijriah taqwim is a lunar-based calendar where a new day in the broad meaning of the word begins at night with a moonrise i.e. the rising of the moon above the horizon. The night of this broad day ends with a moonset i.e. the setting of the moon below the horizon. This is the first stage of the 12-hour interval of the broad day we called night in the Hijriah taqwim.

As the moon exits the horizon (moonset), sunrise comes to the fore known as Syuruk in Islamic calendar, which starts the other phase of the 12-hour interval we called day in the narrow meaning of the word. The narrow day of this broad day ends when the sun sets, known as Maghrib in the Islamic calendar, and the whole 24-hour cycle is repeated for the next broad day.

Now whether this moonrise coincides exactly with a sunset, or a moonset coinciding exactly with a sunrise is for the experts in astronomy or its counterpart in Islam, ilmu falak to answer.

My point here is to show that while the Islamic calendar is consistent in defining day and night with the movement of the moon and the sun, the solar-based Gregorian calendar is not, because it starts a new day at midnight, not at sunrise.

What do you call a midnight in relation to the movement of the sun and the moon? The meaning of a narrow day (brightness to darkness) is rendered meaningless in the Gregorian system because a new broad Gregorian day starts in total, utter and lonely darkness at 12 midnight and thus, it does not fit into the definition of a narrow day. It also does not fit into the definition of a night (darkness to brightness) because the other portion of the 12-hour interval of the Gregorian calendar starts at 12noon.

The choice of midnight to start a new day is thus very arbitrary and herein, lays the confusion I have alluded to earlier.

“Blessed is He who has placed in the sky great stars and placed therein a [burning] lamp and luminous moon. And it is He who has made the night and the day in succession for whoever desires to remember or desires gratitude.” AlQuran, Surah AlFurqan (25): 61-62

The Day of Arafah made simple

The Day of Arafah in all Ahadith refers to the day in the narrow sense of the word, i.e. from the time the moon sets at Arafah, up to when the moon rises there, which is a 12-hour interval.

Within this 12-hour interval are the rites of Standing (Wukuf) at Arafah. That is why the Day of Arafah is also known as the Day of Wukuf. But this is where the mistake arises when you equate the Day of Arafah with the Day of Wukuf because the Wukf rites officially begin on the onset of Zuhr with the performance of the jama taqdim prayers (the combined and shortened Zuhr and Asr prayers.) This is roughly at about 12 noon plus in Arafah.

This is followed by the khutbah wukuf/Arafah (the wukuf/Arafah sermon) and the climax of the Wukuf rites is the standing (wukuf) at Arafah outside the tent where supplications of the mutawiff (hajj guides) will be greeted with chorus of Aamiin and accompanied by sobs and teary eyes of the pilgrims. The Wukuf rites end in the wee hours of 10 Zulhijjah when the fajr azan (the call to the morning prayer) commences.

From the above explanation, one can see that when the moon sets in Arafah, that marks the beginning of the Day of Arafah but it is not yet the Day of Wukuf. Only on the onset of the time of Zuhr, the rites of Wukf begin which means it is at that point that the Day of Arafah and the Day of Wukf are synonymous.

This synonymity ends with a moonrise at Arafah which signals the end of the Day of Arafah, as the rising moon heralds a new day, 10 Zulhijjah – the Day of the Feast of the Sacrifice or Hari Raya Haji. At this juncture, while the Day of Arafah has ended, the Night of Wukuf or the Night of the Feast of Sacrifice (they are synonymous) begins and one can still perform the Wukuf rites if one hasn’t done so until the onset of the fajr azan on 10 Zulhijjah.

The Significance of the Day of Arafah

The Day of Arafah, according to a soheh Hadith, is a day of forgiveness from sins and freedom from the Hell-Fire for the people who are present in the plain of Arafah.

Aisyah (ra) narrated the Messenger of Allah (pbuh) saying: “There is no day on which Allah frees more people from the Fire than the day of Arafah. He comes close and expresses His pride to the angels saying, ‘What do these people (the Hajis) want?’” (Muslim).

Obviously, this hadith refers to the pilgrims. And from this hadith, some make the erroneous conclusion that the maqbulah (the granting of supplications easily by Allah) nature of a doa (supplication) during the Day of Arafah is limited to the pilgrims only.

The fact that all Muslims and not only pilgrims can take advantage of this high-speed connection between oneself and Allah (the maqbulah nature of doa) is attested by this soheh hadith:

Prophet Muhammad (pbuh) said: “The best supplication is the supplication on the Day of Arafah” and the best which I and the Prophets before me have said (is):

لَااإِلَهَ إِلَّا  اللهُ ، وَحْدَهُ لَا  شَرِيكَ لَهُ ، لَهُ الْمُلْكُ وَلَهُ الْحَمْدُ ، وهُوَ عَلَى كُلِّ  شَيْءٍ قَدِيرٌ

(transliteration: laa ilaaha ill-allaahu, waḥdahu laa shareeka lah, lahul-mulku wa lahul-ḥamdu, wa huwa ‛alaa kulli shay’in qadeer)

None has the right to be worshipped except Allah, alone, without partner. To Him belongs sovereignty and all praise and He is over all things omnipotent.” (Tarmizi)

Notice that the above Hadith does not make a distinction between pilgrims and non-pilgrims. It also does not make a distinction between Arafah and other localities.

Another significance of the Day of Arafah is the fasting on that day. According to a soheh hadith of the Prophet (pbuh), “it (the fasting) expiates the sins of two years: a past one and a coming one.” (Muslim). This fasting is mustahabb – only for the non-pilgrims and not for the Hajis (the pilgrims) because it was not the practice of the Prophet (pbuh) to fast on the day of Arafah during pilgrimage and in another narration, he also forbade doing so.

Mustahabb are actions whose status of approval in Islamic law (ahkam) falls between mubah (neither encouraged nor discouraged) and wajib (compulsory). One definition is “duties recommended, but not essential, fulfilment of which is rewarded, though they may be neglected without punishment”.

Timing of the high-speed connection of supplications

The timing of the high-speed connection of supplications during the Day of Arafah has in recent years generated a controversy in terms of the need to synchronise the local time to be exactly the time of the Day of Arafah at Arafah itself.

This arises with the invention of a smart phone that has an app that could easily convert in the blink of an eye the time at Arafah with respective local times.

So let say a moonset during the Day of Arafah takes place at around 6.30am at Arafah, and since the time difference between Arafah and Malaysia is about 5 hours, the Day of Arafah in Malaysia begins at 11.30am, so says a smart opinion that commensurates with what a smart phone app says.

Smarter still, is the opinion that since wukuf starts at around the time of zuhr in Arafah (let’s say 12.30pm), which is within the Day of Arafah, and thus a double significance since the time of wukuf is also the best time to supplicate, so 5.30pm Malaysian time is the best time to supplicate.

Smartest still, is the opinion that says since the Day of Arafah ends with a moonrise at about let’s say 6.30pm at Arafah, you can still make supplication that will be easily accepted by Allah before 11.30pm Malaysian time.

Equipped with the understanding of the Hijriah taqwim as elucidated earlier in this article, you will realise the folly of such smart arguments because by 11.30pm Malaysian time, the Day of Arafah has already ended in Malaysia and Malaysians are already celebrating the Feast of Sacrifice by chanting the Eidul Adha takbeer, although at Arafah, the Day of Arafah is still on.

I have touched on this issue in my earlier article on celebrating Eidul Adha on a different day in different localities with different authorities. The day of Arafah and the fast thereon is always on 9 Zulhijjah, which is determined for each country according to their sighting of the new moon of Zulhijjah as commanded by the Prophet (pbuh).

It is not essential to follow the people of Mecca when there are differences in the sighting of the new moon. This also means that when there are no differences in the sighting of the new moon with Mecca, you celebrate the 9 Zulhijjah on the day the Meccans celebrate it but you don’t have to sychronise your local time with the time in Mecca to get exactly the same timing of the Day of Arafah or Wukuf in Mecca.

Otherwise you are making a mockery of the Hijriah taqwim and also ibadah like the five daily prayers whose timing is always based on the position of the sun in your local areas and not in Mecca or Arafah.

So in simple terms, this means the Day of Arafah in Malaysia will always begin on the 9 Zulhijjah when the moon sets in the horizon of Malaysia (about 7am) even though at Arafah this will be about 2am. Similarly, the wakaf rites in Malaysia, and hence the best time to supplicate, will be around the time of Zuhr in Malaysia although at Arafah it is just about 8.15am.

When the Prophet s.a.w decreed that performance of Korban is dependant on the sighting of the new moon, the Prophet s.a.w is aware that his decree would mean Eidul Adha, and hence the day of Arafah could fall on different days in different locations.

This is now easier to grasp but what is not easy to grasp is this injunction also means that when the Day of Arafah falls on the same day in different locations, the time difference between the locations and Mecca is not to be taken into account for otherwise it will affect the sense of day and night of a taqwim in a particular location which will definitely affect ibadah like the five daily prayers.

Wallahu a’lam bi shawab