Singapore University of Social Sciences

An Interview with David LEE Kuo Chuen, by STK

October 09, 2017

On 9 Oct 2017, STACK interviewed Professor David LEE Kuo Chuen for his thoughts on the industry, on STK, and why cryptocurrency has a role to play in equalising the future of finance. The full interview excerpt can be found below.


Recently, we sat down with David LEE Kuo Chuen, an advisor to STK and Professor of FinTech and Blockchain at Singapore University of Social Sciences. As an industry leader and subject matter expert, David provides strategic direction and advice on the design, technology and inclusiveness behind our cryptocurrency solution. With that in mind, we asked David for his thoughts on the industry, our product and why cryptocurrency has a role to play in equalizing the future of finance.

STK: Hi David, thanks for chatting with us today. You’ve just published two books on Blockchain, Digital Finance and Inclusion recently. You were one of the academics that started research early in bitcoin, and you published the America award-winning book on digital currency in 2015. You were also an early founding investor in Zcash, Qtum, Netki, Bloq, TenX, InfoCorp, and many others. To get things started, tell us what is top of mind for you these days about inclusion.

David: There are many things that I have been focusing on as of late, and my goal is always to generate open and constructive discourse on these topics. The world of finance is rapidly changing, driven largely by an industry that didn’t even have a label until just a few years ago — FinTech. Successful financial institutions have never been short of capital or new technology. FinTech, in this heavily regulated and high-cost environment, can perhaps be re-defined as an activity that changes the mindset and breaks down the silos for the benefit of all. It is therefore inconceivable to conjecture that the best and most valuable form of FinTech is one that focuses on the original purposes of banking services, i.e., to serve those in need of banking services.

I am specifically interested in FinTech innovations with a focus on inclusiveness, accessibility, community orientation, creativity and collaboration.

Financial Inclusion

FinTech has enhanced the ability to innovate freely, to collaborate and to serve low profit margin customers. I have a particular interest in those focusing on serving the entire pyramid of customers and completing the financial eco-system. In modern days, this means having the infrastructure for digital finance. It is even more interesting to observe that the successful FinTech companies are closely linked to serving the underserved segments of the economy and payment is almost always the conduit and first step. These companies are serving many supposedly “insignificant” customers or businesses. My efforts recently are to assist some of these inclusive payment companies to reach out to the segment as a first step followed by fractional ownership of digital assets. OmiseGo, InfoCorp, TenX and HelloGold are all working in this space but providing different types of technologies and services through serving different segments to complete the ecosystem. In particular, InfoCoprp serves the migrants and farmers through payments, certification and ownership. HelloGold allows for fractional ownership for financial inclusion. I observe that more than 80% of the people without bank accounts in some ASEAN countries and there is room for many digital financial services projects.

Decentralization and Blockchain

The other area that I am interested in is decentralisation. Many ask me why decentralisation is important as an area of research and investment. Open and inclusive blockchain has a lot of socially beneficial properties besides being auditably secure and transparently accountable. It can restore faith and increase resilience in the financial system by enabling cross-border economic cooperation and integration. Secure cross-border Peer-to-Peer (P2P) payment wallet is the first step in achieving this goal and critical in helping economies leapfrog, bypassing all the pains points faced by developed economies. Decentralisation plays an important role because it allows for frictionless cross-border P2P activities. Most of the successful decentralised projects are open source experiments that encourage mass participation and contribution, has a benevolent economic incentive structure that embodies the interest of all, and global in nature to source for markets, talents and resources. Decentralisation also prevents an extreme concentration of power and inequality of wealth that have proven to impede economic growth and is the cause of social instability. Decentralisation can build economic resilience with more even distribution of wealth. For a just, prosperous and asset sharing global economy, decentralisation and the spirit of diminishing oneself and furthering the network’s interest are vital. I have an investment interest in Least Authority, Cybex, Scry and few others because decentralised encryption, decentralised privacy, decentralised exchange of value, decentralised storage, and decentralised access are keys to ensure dignity for humans in an AI world. These projects and experiments will hopefully reduce the pain points of cross-border net neutrality with secure privacy and ensure mass adoption and usage.

STK: There’s been a lot of buzz and hype around blockchain and decentralized financial systems lately. Recently, Christine Lagarde, Managing Director of the IMF stated that cryptocurrency could be the future of money. Despite that, cryptocurrency is still in its infancy in terms of mainstream adoption. Why do you think more people are not using cryptocurrency and decentralized financial systems?

David: There are 4 distinct challenges with cryptocurrencies like Bitcoin including technical limitations, difficulties of onboarding and accessing or buying into cryptocurrencies, merchant acceptance, and delays in verifying transactions:

1. Technical limitations

Bitcoin has been around for eight years and many are surprised at its resilience in terms of technology, financial and adoption. However, it is still in its infancy and has all the signs of a project with great potential. Its influences are not limited to the mindset change of a generation. However, contrary to most people think, volatility is not a significant reason why it is not widely adopted. There are many technical reasons such as transaction per second, blocksize, storage of blockchain, privacy, legality surrounding the use of smart contracts and Oracle. With only seven transactions per second, bitcoin cannot compete with private blockchain and payment companies such as Alipay that can reach more than 100,000 transactions per second. However, these issues are being looked into and I do not think technology will be stagnant. It is just a matter of time that a decentralised secure cross-border payment system will dominate. With smart contracts and more open blockchain, I am optimistic that it is not a question of whether there will be mass adoption, but when. Japan has declared its leadership in the adoption of cryptocurrency, and that signal is enough to give comfort to merchants and users. Bitcoin, Ether, Zcash and a few others are clear market anchors and leaders, but there are many other respectable ones in the 1200 cryptocurrencies space. I am sure we will hear more about them.

2. Difficulties in onboarding and getting access/buying into cryptocurrencies like Bitcoin

For those of us who were involved since the early days, we noticed that hardly any energy was spent on improving UI, UX or KYC in the beginning. Open blockchain was created to bypass regulation, and also research has shown that cryptocurrency is not the best medium for money laundering, tax evasion or terrorist financing. Forensic science can identify a user based on the pattern of usage with more than 80% success rate. It was also too early to talk about interoperability and being inclusive in the protocol standards. However, since 2016, the efforts have been concentrating on the issue of identity, onboarding and user experience. In 2017, the community is beginning to look at improving the standard for integration and interoperability in the name of inclusive blockchain. Once the community understands the value of the blockchain is the degree of inclusiveness, the issues of UX and UI will become the focus. It takes time, and I have seen vast improvement over the past six months. Furthermore, for financial inclusion, it is not the standard KYC or ATF procedures that are important but facial recognition, GPS positioning, and other modern techniques. I believe user-friendly wallet will be the winning formula and easy access to cryptocurrencies are more important factors for mass adoption outside the financial centres.

3. Lack of merchant acceptance

Before Japan declared that bitcoin is a legal payment system, the efforts of the community have been on building the base layer of technology. The industry is short of app developers, and it is only since April 2017 that there is a focus on merchant acceptance. Without having to understand the backend of the app or cryptocurrency, mass adoption is just a matter of time. Earlier ventures into this area have been challenging with negative sentiments towards bitcoin. However, that has changed from misunderstanding to fear of missing out. Many governments and incumbents will be keen to promote cryptocurrency payment as technology advances to solve the last mile problem. It is the most cost-effective way for cross-border payments, and I believe the World Bank and IMF will push for it to lower remittance charges.

4. Delays in verifying transactions

This is an issue for bitcoin, but recent BIPs are trying to address some of these issues using lightning, sidechains and other methods. I do not think it will be a major issue in a year’s time.

STK: As you know, those are some of the challenges we have designed our token to solve. Using our STK token utility, we hope to facilitate ubiquitous merchant acceptance and address delays of blockchain transactions so that it can be used for real-time point-of-sale transactions. By creating a solution that lets you spend your cryptocurrency at almost any point-of-sale that accepts major debit and credit cards, we hope to overcome some of these obstacles that other cryptocurrencies are facing today. Why did this type of project appeal to you?

David: The idea of a bridge between the traditional financial and payment systems, and the new world of FinTech and blockchain is both new and necessary. The cryptocurrency technology is still in its infancy, and it takes time to evolve. However, what bitcoin and other cryptocurrencies have achieved over the last few years have been amazing. My primary interest lies in the development of distributed technology to ensure that human dignity is not compromised when AI machines take over the world. In the meantime, the main problem is financial exclusion because of the way the society is organised. Blockchain will be the catalyst for the 4th industrial revolution because it enables untrusted parties, especially if they have no access to capital to improve their infrastructure, to collaborate. Familiar breeds behaviour. This project can potentially distribute a point of sales via smartphones into the hands of all those that have been excluded from the system in remote areas. At the same time, it is inclusive that it potentially allows the cryptocurrency system to be complete in providing an avenue for P2P transactions.

I’m also behind the mission of providing people with access to “their money” whether it was fiat or cryptocurrency

Eventually, two types of digital currencies will have mass support. One that is backed by trade and reserves, and another that is cryptographically secured. This project not only plays a role in completing the cryptocurrency system, but it is also inclusive and forward-looking in allowing everyone to have access to his or her money anytime, anywhere.

More importantly, the team has strong technical background and proven execution track record. Given their business experience, they will be able to find more collaborations. Collaborations are essential to be successful in the borderless blockchain world because the identified market is more than half the world population of above 15 years old with few incumbents ready to venture into those areas.

STK: Is there anything else that excites you about the project?

David: One of the areas of financial services and financial technology that I’m most passionate about is the idea of financial inclusion. People around the world face many barriers when it comes to accessing, spending or saving their money. A universally accessible solution that provides advanced financial services to people regardless of country or currency is something I am excited to be a part of.

How successful a project will be will depend not on how much it will rule the market or compete in the ecosystem, but rather how it is going to serve the underserved and how it positions itself to complete the fiat and cryptocurrency ecosystem. The team is fascinating and technically very competent. Their sense of mission is what inspires me in sharing with them my views and direction of where the world is heading. I believe the project focuses on inclusiveness and completeness, and that philosophy is in full alignment with the crypto community.

STK: David, thank you again for letting us interview you.

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