I’m sorry I can’t make it to the conference. Were you at the conference today?
Yes, we just finished the session.
Awesome, awesome.
Yeah, you can have the 30-second version.
(laughter)
It’s much better.
See, you stay in your office, you don’t go anywhere, the guy comes to you, he’s sitting there.
(laughter)
It’s fantastic.
It’s fantastic, yeah.
Look, I was asked to talk about the relationship between regulation and financial inclusion. It’s a good topic for our center, because we’re very global in scope. We are very focused on understanding what channels and instruments are emerging in the financial system outside of the incumbent system...
That’s right.
...and why. I’m actually a sociologist by background, so I’m very interested in the intermingling of social movements and technology, and how that really produces, operationalizes some of this innovation. It’s not just the technology. This is a strong emphasis of my personal life.
We’re very interested in how all this stuff emerges and why, but also how does the system then respond. This gets into the regulatory realm. Hello.
Hello. Hi.
Sorry for interrupting. Aurora Tsai.
Hi, Aurora. I’ll give you a card.
Thank you.
That’s fine.
Thank you.
Thank you.
Hello. Ravi. Nice to meet you.
Aurora.
Our office has one staff from each ministry, at most.
That’s pretty good.
Yeah, very horizontal. Technically, we can have 34 staff, because we’re 34 ministries, but at the moment 22, and she’s the ministry of foreign affairs dispatch.
In our case, the interesting phase of the market -- we look at this whole thing of fintech right now -- is the absorption by their system response, and of course regulation’s critical. It’s not going to be operationalized if the regulatory environment doesn’t enable it to be.
This struggle that regulators have, where they’re really operating in a fundamentally different frame than they have historically operated in, introduces a whole bunch of challenges, whether it’s a talent issue, or whether it’s just the cultural issue, there’s a number...
Then the impact of that in financial inclusion...We gather data and we do analysis today, particularly in terms of online crowdfunding including pillar and all that stuff. It’s empirically a different research in about 185 countries, and we have five years’ worth of data.
As a research center, by far the largest scale of research in that empirical analysis, that’s led to a joint venture with the World Bank, which is very focused on financial inclusion. All those data sets become available next quarter in a joint website that researchers can download.
Another very focused research area around alternative payment systems and tokenizer cryptoassets, and then a lot of work in regulatory innovation.
Some of the stuff I talked about today was drawn from a report we just finished for the United Nations...it’s a long -- UNSGSA, which is United Nations Secretary-General Special Advocate for Inclusive Development, which is Queen Maxima’s group.
It was MAS in the Singapore that funded this for the UN for us to do that work, and I think that report’s released next week. Some of the outcomes of observing how regulators are approaching this. Is it impacting financial inclusion? What approaches are they taking?
I also highlighted the risks. When I talked about this notion of the social, huge underestimation of the risk to community of just proceeding in the belief that the technology provides all answers. I used demutualization as an example with respect to credit analytics, and how these really become social debates.
What kind of a society do you want to live in, fundamentally? I’m not value-judging that. I’m just saying, but that’s a debate that needs to be held and it’s going to emerge.
This notion, also, I think the conceptualization of what do we call the excluded is quite interesting. What are the proxies for defining that, are big issues.
Historically, for example, the financially excluded, the proxy historically has been, do you have a bank account? Everyone sets out to derive the number of bank accounts. Guess what? They have them and they don’t use them. Was that the right proxy? What does financial inclusion then really mean?
Also, the whos. I’m personally quite interested particularly in smaller micro-enterprises. I think, particularly small and medium-sized businesses, they’re not often viewed as being financially excluded, but they are.
We have a lot of analysis that indicates that they’re not obtaining as much credit as they deserve relative to others who are obtaining credit based on a given level of creditworthiness in the economy. There’s credit-starved pockets that are limiting economic development, constraining economic development also in developed economies.
We’ve done a lot of work actually analyzing the SMEs that have been funded through the non-bank channel through peer-to-peer lending in the UK market with those that have been funded through the bank market. Actually, you can very clearly see where there’s algorithmic bias, conscious or unconscious, in terms of the bank credit scoring. You know that stuff.
How do you use then some of the enabling capacity sizing technology to actually fund that group and actually perhaps fund less? I would call it re-allocation of capital in the economy from the overfunded to the underfunded. I think that rebalancing? Interesting economic payoffs.
When I visited DCMS a couple months ago, they mentioned that they are going to extend the use of dormant accounts more. There’s a law to, of course, enable the use of debt, which is a tiny percentage compared to the economy devoted for startups or innovation in general. They are looking to expand it more.
Then, I visited Edinburgh on the Social Enterprise Warfarm. There is a policy Warfarm. People talked about such financial instruments.
Exactly.
Then Scottish people think that’s still token compared to what the UK can actually do. That’s a very interesting debate we were having in the Social Enterprise World Forum.
There’s interesting organization, Big Society Capital.
That’s right.
They’re the head of this. That’s funded by their own accounts.
They’re one of the co-organizers.
We looked at that. Definitely we’re looking at in our research outcome focus. First of all, it’s understanding what’s going on. Because you got to start the debate somewhere with a common starting point where everybody’s on the same page. Four years of data, including even in the block chain and crypto space. That’s been an aim.
Then it gets more into informing the debates that emerge once that common point has been arrived at. That’s a big area of focus. I would say in those areas it’s around inclusion. The other one I would say is around sustainable-environment stuff.
The SDGs.
Yes, exactly.
[laughs]
Those are pretty big areas of focus. When we set this thing up four years ago, we realized, "Well, there’s lots of research centers in the world. What can we do that’s really different? What’s the value-add here? Because if we can’t add any value, we’re going to struggle for money. We’re going to be knocking on doors." It’s global comparative analysis.
We leveraged the Cambridge brand name to go global immediately. We stuck with that. We deepened it. The most recent thing we’ve done is we’re dropping research teams on the ground, embedded in organizations around the world so that we’re closer to what’s happening at a more grassroots level, particularly important when it comes to innovation.
We’re dropping teams into Hangzhou, Santiago, Chile, and Nairobi. Those teams are going in Q1 ’19, maybe Santiago Q2. We’ve got the funding with host organizations that recognize that bringing research capacity and also being able to cross-connect between the regions and even within the regions.
With people like Asian Development Bank that don’t do what we do, we come at it a little differently. What’s interesting to us is this notion of reverse innovation, where you’ve got not this traditional from-developed-economy-to-developing-economy dissemination pattern that was the historical logic of this stuff.
Colonizing, it looks like.
Exactly. It’s flipped.
That’s right.
First, it’s understudied, those mechanisms. Secondly, you got to be there to really observe it. You got to be in the Petri dish with it to understand the mechanisms of this innovation.
You need to hang out or, academically speaking, ethnographic. [laughs]
Yeah, exactly. That’s why the teams are going in, OK? They’ll contribute to this global empirical data stuff that we do, but it’s also to really sniff out and get in. We’ve done quite a bit already with Rwanda, Uganda. These guys just came yesterday from...
Mozambique.
...Mozambique.
Oh, wow.
Every week, we’ve got somebody somewhere in the world on the team, because it’s a big team now. The idea is this getting deep, but at the same time enabling that connectivity because of course it’s borderless stuff. What’s popping up in Nairobi is going to pop up in Santiago, or some version of it here. Do you know what I mean? Fast.
That’s right. My operational moniker for the g0v movement here, we call it scaling deeply, not scaling up, not scaling out. Scaling deep.
That’s right. That’s what we’re doing...
I think it is the same idea.
...scaling deep. We should copy that.
(laughter)
That’s good, but that’s exactly right. We’re also trying to develop, actually operationalize some technologies also that break down some of the frictions that we see in this mobility. For example, we have a platform that, do you know Omidyar in New York? The Omidyar guys?
Yes, of course.
Omidyar provided an initial funding of, I think it was $319,000, because they recognized the same problem we did, that you got these early successful fintechs in some cases and now they want to go cross-border. Say, they want to come to Taiwan. They’re in Hong Kong...
I had a fireside chat with Stephen King in the World Congress on IT. They’re, I think, creating a kind of entity dedicated for civic tech for both with-profit and for-profit organizations around Asia, but because I’m a public servant, I can’t really participate in their steering committee or advisory board.
We are in close connection when it comes to this side of democracy-augmented investment. Of course they do very much other things also.
Interesting. What we’re doing is, we’re using a machine learning-based NLP platform to build essentially what will ultimately be a machine-executable base of regulatory information, but in the short-term, we actually have...You can explain. It’s your project.
(laughter)
Code-based connectivity.
It’s trying to look at the common features of regulation in different countries, and using computers to identify those common features to enable comparison between them. To do that, we’re starting in a specific area of regulation, that’s anti-money-laundering, but then we want to roll it out to lots of other areas of financial regulation.
Going through that process will require basically grabbing all of the regulation from every country, every central bank and securities organization, and classifying it into the different areas of regulation to feed into our database.
That will allow users, both fintech firms, financial service firms, but also regulators and policy makers, to have a central depository of regulation at one level, but then be able to compare the differences between different countries on another level.
Ultimately, you want to be able to enable that to be updated automatically to enable people to keep up to speed with regulatory change a lot more easily than is currently possible.
It’s still wise to reduce friction on across-border regulatory permissioning and obligations. Simple.
Right. I’m aware of a similar work around constitutions. It’s of course much more academic, and it tracks the importance of civil liberties, fundamental freedoms, the various UN conventions, and how it seeps into the...Because constitutions, they don’t change as quickly as financial regulations, whether there is a clear kind of lineage in it.
I think computational law will benefit a lot from that. On the other hand, I’m aware of the Legalese people, I think that’s the name of the team in Singapore. They do a very applied thing, which is take the basic contract, for example convertible bond or whatever, of kind of early startup financing, and describe it in code.
Whichever jurisdiction it’s operating in, it compiles it into whatever the most concise way, treating jurisdictions as essentially different machine types and then compile the contract, which is code-defined, into whatever contract law that’s currently in operation.
Whenever the regulation changes, they just change the compiled contract while keeping the intention. These are like completely two ends of things, but it seems like you’re working on actually solidifying the digitals in the middle.
That’s right. We’re drawing on the technical resources from within the Cambridge ecosystem, combined with our knowledge. What we bring as a center, I think, is our relationship today with well over a hundred regulators.
That was really introduced by virtue of the fact that we were effectively the sole provider of this alternative finance information that enabled them to understand what was going on in their countries.
It’s emerging so rapidly, there aren’t formalized structures collecting this data. We do it through an army of interns and just huge number of collaborations every year, which is labor-intensive, but it’s created these relationships that enable us to draw on that community essentially, to populate this.
Right, and now also with assistive intelligence or AIs.
I think what’s interesting with looking at this from the regulatory side, something that I’m really keen to explore in 2019 is how we can use the same types of techniques for entity mapping to see who’s in the market, looking at, say, a techonomy of different activities.
Assuming that business wants to describe what it does on its website, you can use that language and then categorize them into the different activities.
We spent so much time trying to work out who’s doing what in which market, and how that’s evolving, and how businesses are currently changing its different products, and things like this. It’s a pain point I think we’ve seen in turn.
Cool. Quite a few legislators here also see the need for having a kind of self-disclosure for, especially security token offerings but also other crypto stuff.
At the moment, aside from anti-money-laundering, which is pretty much universal, all the jurisdictions devise completely different ways for the STOs to do the diligence or to review the information, and so on.
Everybody see the need of a commonly agreed kind of structured information, but on the other hand, it can’t be a taxonomy. It have to be a folksonomy because there’s a really no one-size-fits-all approach when it comes to STOs, because all the jurisdictions are wildly different.
There’s quite a few efforts here locally as well to, at least regionally, something like what you described, to track the activities because previously, they just published white papers themselves and/or registered, but not necessarily...
Is that happening in universities, or where is that kind of effort happening?
The universities here are supporting the technology part, but there’s many, like the GITA. There’s a GIT Alliance. I think that’s the name. The gita.foundation, I think, it’s the one that tomorrow, they’re going to be in Academia Sinica, which is a research organization, but it’s not strictly speaking reporting to cabinet. It reports to the president. [laughs]
It’s a very interesting kind of Lagrange point between the social sector and the public sector. Academia Sinica people have traditionally worked on this, citizen science on one side and government data on the other side, and they’re seen as a trusted point between the public sector and the social sector.
The Academia Sinica hackathon, the g0v hackathon, G-0-V, which happens every couple of months, we see a large number of designers, engineers, but also academics and people in the field working on something like this kind of thing in a cross-sectoral collaboration.
I think the physical space where it happens is Academia Sinica, but the people who join are of course from various different stakeholder groups.
That’s quite interesting also because I think you know the whole emergence of citizen science and citizen sensing is challenging authority.
Yeah. It’s very much something in Taiwan, we can’t beat them, so we just join them.
(laughter)
Especially in Asia, this is really the only place where we say this kind of stuff. When people in Taiwan assembled the air quality sensing apparatus, and all this is...
That’s awesome. Where is that? Is that publicly some...
Yeah, of course. It’s the g0v that I mentioned, with the call to so-called fork the government by having all the service they think government should provide but don’t, and build citizen science alternatives to this.
The environment for example, by just changing the government website from O to a zero, you get into the shadow government, which is open-source and open data, and so the Li Xigong Gwanzou, or the Air Quality Measurement Network, it’s called AirBox, the device and the network’s called LASS, L-A-S-S, and they’re under $100 in construction.
How many are out there now?
The nodes, I think it’s a old picture, so definitely more than 2,000 now. It’s completely citizen-funded, and it creates, as you said, a legitimacy challenge.
Exactly.
Between the very precise EPAs, and so that’s five kilometers away, and the microsensors people put on the balcony, of course I’m going to trust my neighbors even though they have technically less precise equipment.
What we did is, as a government, we used distributed ledger technology and engaged the Chang Gung University’s distributed ledger lab to make sure that they take a snapshot and then upload to our National Supercomputing Center, so people can do evidence-based climate research and so on.
The citizen scientists, they cannot go back to modify their numbers, but they also trust the government cannot also go back and modify their numbers because of DLT. [laughs] That’s one of the very few legit use of DLT...
I agree.
...when it comes to open data.
It’s excellent. I’ve never heard of this. Did we note this?
I want to look at this.
Then for this in particular, we actually built a portal to explain this because we think it’s of importance internationally, and we call it the collectiveintelligence.taiwan.gov.tw, the Civil IoT System.
There’s an English page in there also, so it’s not just meteorological or air, but also disaster recovery, earthquake prevention and detection, and water quality like the water pipes and the leakage detection.
We actually worked with the New Zealand Water Corporation for three months, adapting this AI leak detection to their pipelines, and again, in a very appropriate technology. Allowing our technology to be appropriated, I think that’s the idea of open innovation, but that is the kind of ethos we live by. It’s not colonizing technology but...
Is this challenging any corporate interests yet?
Actually the system integrators in Taiwan, they are totally on board with this because we know that we cannot actually fill in all those different points. What they now say is that OK, they can provide better analytics, they can work with the environment agency to identify the digital gap and set up similar low-cost microsensors.
They can manufacture something that is manufactured in Taiwan and not in nearby jurisdictions, and that doesn’t have cybersecurity issues. [laughs] That can provide a better quality network.
The larger corporation, they also say they want to contribute. For example, the citizen scientists really want to put a air quality sensor here on the Taiwan Strait, but it’s impossible. Even with drones, they run out of battery eventually.
There’s people working on drones also, but we are working on it because of the wind plant, the power plant of wind turbines.
Now we work with system integrators to embed their network and the DLT into the sensing technology of the offshore wind turbine plants, so that the citizen scientists can get the number they want and the system integrators, they also have very good PR and even business...
This is very interesting because one of the emerging areas that I think we may start to try to research this year, remember I mentioned about the environmental sustainability stuff’?
There’s a problem in the capital markets right now I see with respect to green-certified financing. This becomes interesting, where you can introduce environmental covenants as another set alongside financial covenants, and accordingly, sanction or reward based on...
Based on popular sentiment.
Is anyone here thinking in that line?
Who is?
(laughter)
...but also there’s a whole...
I know, but you’re you.
(laughter)
I mean, out there.
Yeah but the CI system really is a collection of all the different ministries. It’s like five different ministries joining, and so there’s a steering center for this, and so I would highly encourage you to get in touch with these people.
For example, they’re putting out huge awards, I think the first prize is three million Taiwan dollars, just to get anyone who can do some sense-making based on this international standard of climate and air quality and whatever technology. Just making the ground truth understandable by people is itself a prize.
Indeed, we are quite interested in data because since 2015, we collect such kind of fintech data from the 2,000 platform among 170 countries, which we are going to publish this kind of data for academic, for industry, for the regulator...
This is a bit different. I’m interested where this interfaces with finance though. This is taking environmental data and bringing it into the world of finance, to actually drive behavior change. That’s the bottom line.
To basically say social impact is part of...
Exactly. Ravi, this the LODI discussion.
I was thinking exactly the same. Yesterday, we met up with the Asian Development Bank and...
We know them pretty well, and particularly, we’re doing some things with their...
At the Center for University Social Responsibility is also thinking along these lines. There’s a program in Taiwan called...
Which University?
...a USR, like CSR buffer universities, which is encouraging universities to design five years worth of capstone projects that engage their professors and students in service of a environmental or social need locally. It’s a very large budget, actually.
Do they do international collaboration in the research funding, or is it just domestic?
Currently it’s just domestic, but starting next February, they are going to map all the USR projects, there’s many, using the sustainable goals.
What we are looking at with the USR is that eventually, we’ll be able to show a map of Taiwan and show exactly which goals or which universities USR program working toward, because it’s not like the old way of the Ministry of Education getting an agenda, setting out grants NSF-style stuff.
It’s the other way around. It’s the community, the environmental community, working with a local college and figuring out a way to make students part of the inclusive decision-making in the community, and then funding based on the KPIs that they themself make.
For the Ministry of Education, it’s two years of pilot. If it works, then three more years of funding, no question asked. It’s a very different agenda setting.
It’s available, but it’s not available in any international research collaboration context.
I think the USR office is looking toward international collaboration because it’s really new. It only gets into the social innovation plan this year.
OK, because as I understand it, one of Taiwan’s strategic objectives is more international collaborations.
Oh yeah, very much so.
Is that not right?
Of course.
That should be reflected in a program like this, I would have thought.
Yeah, which is why they’re re-indexing using SDGs and I think once the remapping is complete by next February, international dialogues are much easier.
OK, because we’re now starting to think through for the team that’s actually going to go into the host organization will be the ADB in Manila. In the team, it does exactly this.
That’s awesome.
They’re not playing with the technology. They’re focused on green bond finance, and they’re focused on more of the traditional approaches. Why they want us embedded is, we’re thinking more like this. They understand this completely, of how it could impact behavior change in a more powerful way than the loosey-goosey green bond market, right?
Exactly.
We’re very interested in this. What do we do to follow that up, because I could have a Manila team working on this.
We’ve worked with human geographers, we’ve worked with cultural anthropologists in international research organizations. Usually, they just come here and randomly intern for three months or something. [laughs]
We’re totally open for collaboration in this regard. All our social innovation action plan meetings, my touring around Taiwan, meeting with these cooperative people, indigenous people and so on, all the transcript are open.
If you’re interested, or any of your research fellows is interested, they’re totally welcome to just shadow me a while and get to know the right people along the process. We’ve worked with many universities this way. Not many, like three, but yes.
(laughter)
Three is more than a pair.
That’s right.
(laughter)
What’s interesting to us is also where there’s a path to research funding, because at the end of the day, somebody has to pay for all this. That would be interesting, Chen, to explore, right?
It sounds like post-February, those paths open up perhaps.
That’s right.
That’s definitely interesting. We’re interested also in terms of whether there’s any interest in the involvement in our project, which we call RIG Simple, which is the comparative analysis of global regulatory information. Any thoughts there on whether...Is there any connectivity possible where we would perhaps connect in?
It’s funny, because listening yesterday at the fintech base event and the challenge even of firms looking at understanding...that are considering going into the Sandbox environment and understanding the regulatory environment, what is the permission and what are the obligations.
Even something as simple as that is potentially...Particularly if a company’s coming from outside the country, and they’re looking at the Taiwan environment, that’s it. Is that a demo in there? What is on there on the right side?
I think it has the AML, the anti-money laundering. That’s the main thing.
That’s where we started.
I’m of course happy to work with our National Development Council, because they just announced actually the so-called bilingual nation plan yesterday.
Really?
Sorry to interrupt you.
There’s a point there, but the whole language issue is a key thing that we need to work out, and we have decided to focus on English language, initially, because there’s about a hundred countries that provide all of their regulation and law in English.
Yeah, and lucky for you. By this time next year...
(laughter)
...we translate everything related to international trade and finance and so on to English. Previously we do so for law, but actually most of the details are in regulations as you will know. Now we say as soon as a regulation is related to international trade, financing, and things like that, we need to provide our English versions.
We’re also working with the judicial branch saying that if they have important rulings and so on to that effect, they actually become de facto law, but previously they were not available in English, not even a summary.
They also need to provide those in English, otherwise the picture is not complete. You can get caught up in our continental law systems’ wordings, but actually it’s the interpretations that count, and so all of this needs to be translated to English.
That will be fantastic for the system we’re building, which would be great for Taiwan, but in the future many countries just as Mozambique expecting [laughs] their governments to translate the regulation to English is probably...
Maybe we should push for that though.
(laughter)
I think that would be a really long time. The whole issue of machine translation and being able to make our system work in a number of key languages to ensure as global coverage as possible is definitely going to be an issue that we’re going to have to address, but that is a criteria that would fit...
Yeah. When I was visiting Canada...and as you know that, they have a English-French by law compulsory thing, but for most of those emergent content is really difficult, and they’re also working on.
English-French is one of the best pairs for machine translation at the moment, but even though we all recognize that, they still have to put a distance machine-translated mark. They have to figure out a lot of internal regulations to even offer this to you. It would take a long time because, as we’ve said, this is fundamentally a social issue that people need to feel secure in the technology.
A mistranslation could mean the opposite thing, and it could mean the world’s difference. We’re also working on this technologically, but we’re definitely not doing this in a top-down regulatory fashion.
We’re encouraging people to work on it, to tackle it as a kind of open technology for everybody to use, but we’re at the moment still using the old-fashioned way of just publish bilingually.
Who would be the right group? We’re talking to fintech base, for example. They’re quite interested in this.
They’re the right group.
We’ll keep that dialog going.
The bilingual regulatory publishing work is coordinated by the National Development Council.
Yeah, the NDC is probably the right contact for this.
Great, Thanks for your time. Really appreciated and I’m amazed. You’re doing some very innovative things. Is something more agile in your structure? How are you getting away with that? That’s put a bit strongly, but you know what I mean?
Yeah. I have three compact... I negotiated in public through a Ask Me Anything platform during the months between my appointment and me actually being the digital minister.
The three things are voluntary association — meaning I don’t give orders, I don’t take orders; location independence — I get to work anywhere; radical transparency — anything I can see I can publish. [laughs]
All these are actually core values in the Internet governance that I learned as my primary political system in the old IETF days back in the ’90s. I was like 15 at the time, and it would be another five year before I actually get my first vote right in the electoral politic system, which seems a very quaint system to me at the time; I had experienced a better system with already five years of the experience.
I think these three really are the key. Because of radical transparency, people trust that I’m doing the work that I do, even though because of that I cannot know the military secrets.
If they do a military drill, I just take a day off. I don’t where the bunkers are. This enables me to be still part of the civil society but with the government. A voluntary association means we get the best and brightest from each ministry, with no commanding relationship and all they agree to do is basically to work out loud, to let everybody else see what everybody else is working that’s it.
It’s interesting. Pretty interesting.
Thank you.
Thanks.
Thanks very much.