An Industrial Policy in Finance

That is quite an act to follow but I will try.

Speaker, an industrial policy in finance may seem a contradiction in terms, but it is not. The most consequential 20th century financial industrial policy was built by the British on the then undisputed reserve asset – the United States (US) dollar.

Once, in 1933, the US imposed Regulation Q, capping interest rates that American banks could pay. By the late 1960s, the ceiling was 4%, while three-month Treasury Bills approached 7%. Dollars held offshore, especially in London, escaped this cap. This offshore dollar market became known as the Euro dollar market.

The British did four things.

First, deliberate forbearance. Choosing not to regulate offshore dollar deposits.

Second, active defence. When G-10 central banks proposed international regulation in the 1970s, the Bank of England blocked it.

Third, direct participation. Central banks provided official deposits of 20% of net market and currency swaps with domestic banks.

Fourth, after the 1974 banking crises, the G-10 Basel communiqué constructed an implicit lender-of-last-resort guarantee.

The result: London became the global centre for dollar financing. By the mid-1980s, there were more Euro dollars than dollars. The Euro dollar market increased the appeal of dollar holdings, deepening the liquidity for American borrowing. This privileged position, London held for many decades.

What is instructive is that the British reinvented London's proposition amidst the decline of sterling. Nostalgia is not a strategy. They re-positioned for their emerging present.

Today, we have another emerging present. Then, interest rate caps created a push factor for the world's reserve asset to move offshore. Today's push factor is not yield. It is custody risk – the question of whether your reserves are still yours when the politics turn; and the emerging reserve asset seeking an offshore home is not dollars. It is gold.

Two forces are driving this shift.

First, access to funds has become conditional on political alignment. In 2022, Western nations froze over $300 billion in Russian sovereign assets. We rightly condemn the invasion of Ukraine, but the knock-on effect on Western financial centrality is real. Trust in those systems has diminished.

Second, market participants are pricing in US asset risk in a way they did not before the 2020s. Some call it a "Sell America" dynamic.

Central banks are responding with their feet. Gold purchases have exceeded 1,000 tonnes annually for three consecutive years, more than double the 2010 to 2021 average.

The World Gold Council's 2025 survey shows 73% of central banks expect fewer US dollar holdings over five years; 95% expect to increase gold over 2025 to 2026.

What makes this structural is the price insensitivity. There are few good alternatives for a reserve asset. Central banks bought at $2,000 an ounce, at $3,000 an ounce, at $4,000 an ounce. And gold crossed $5,000 in January. These are sovereigns seeking safety over returns.

But if gold is becoming a reserve asset, it will need to be financialised. Later, I will describe what that means in five pillars.

First, let us assess some major gold hubs of today. London, New York and Dubai.

London is the central gold pricing venue and is one of the world's major custodians for the world's central banks, via the Bank of England vaults. It offers unmatched liquidity for gold, especially for the 400 oz "large bars" used by central banks.

It is the home of the London Bullion Market Association (LBMA), which controls the global "good delivery" standard. This certificate is important for liquidity amongst major financial centres.

In February 2022, after the Russian invasion of Ukraine, the G7 immobilised $300 billion in Russian central bank reserves within weeks. The LBMA suspended all six Russian refiners from the Good Delivery list. The message: custody and market access are conditional on political alignment.

Central banks have responded. In 2024, India repatriated 100 tonnes of gold from the Bank of England to domestic vaults – its largest movement since 1991. Germany, Hungary, Turkey and the Netherlands have done the same over the past decade. The repatriation trend is accelerating.

The case of New York is a puzzle. In the lead-up to Liberation Day in April 2025, as tariff fears spiked, the exchange-for-physical (EFP) basis, which is the spread between New York COMEX futures and London over-the-counter (OTC) gold, blew out to $60 per ounce – the widest since the 2020 COVID-19 panic. This led to COMEX vaults in New York hitting a record 43 million ounces. For a moment, most of the world's financialised gold was in New York, rather than its typical home in London. New York had custody over both today's reserve asset and tomorrow's, simultaneously.

Consider the counterfactual. A US Federal Reserve (the Fed) gold repo window, accepting COMEX gold warrants as collateral. Strong financing terms could have made New York the permanent home for monetary gold, since much of it was already in COMEX vaults.

Now, it is true that the Fed conventionally runs repo backstops on Treasuries, agency debt and agency mortgage-backed securities (MBS). But that is already an expanded listing over pure Treasuries, pre-2008. So, why not COMEX gold warrants? They had the moment – and did not act.

So, there is no appetite, not yet, to backstop gold in New York. Deep markets, but no lender of last resort.

Asset holders must also weigh the International Emergency Economic Powers Act (IEEPA) tail risk. The executive powers used to impose tariffs in February 2025 could be turned on foreign-held assets.

Today, only the US can offer a sovereign repo on gold as they have the reserve currency. So, if they do not backstop gold, financialisation will likely not proceed on single sovereign rails.

Dubai is closest to what we could build. Aggressive infrastructure: vaults, multiple refineries, direct African sourcing and the natural catchment of India. It is estimated that Dubai handles upwards of 15% of global physical gold trade. In 2023, the United Arab Emirates overtook the United Kingdom to become the world's second-largest gold trading hub.

Dubai offers proximity to supply and demand, but also to Gulf conflict dynamics. Singapore offers a trusted node to multiple parties.

Dubai has captured volume partly through more permissive sourcing standards. That is not our game – our competitive advantage is rigor and any visible compliance failure on money-laundering would destroy the credibility we hope to sell.

But this is not zero-sum competition. The shift to gold is large enough for multiple hubs. And the market interest already exists.

Deputy Prime Minister Gan said in response to my January Parliamentary Question about critical minerals financing, that the Government will act "when there is sufficient market interest." Well, the interest is here. In the second quarter of 2025, gold investment in Singapore surged 37% year-on-year. SPDR Gold Shares recorded S$309 million in net inflows in the first half of 2025 – the highest of any Singapore-listed Exchange Traded Fund (ETF). The Singapore Mint launched its Lion Bullion line in September, explicitly citing strong investor demand. Private vaults are expanding: The Reserve opened last year with capacity for 15,500 tonnes.

The market is here. And so is the chance.

In that same Parliamentary Question I posed to the Ministry of Trade and Industry in January, I asked why our framework for metal warrant financing is under-utilised. The response from the Ministry framed it in terms of the base metals, by referring to the London Metal Exchange (LME) ecosystem, which handles the six primary base metals – copper, zinc, aluminum, nickel, lead, tin. But not gold.

I had in mind gold, not base metals. Gold operates through the LBMA – different rules, different warehousing, different settlement – and requires purpose-built architecture.

Singapore's gold infrastructure, with respect, is minimal. We have one LBMA-approved refinery – Metalor, Swiss-owned. Central Provident Fund members investing in gold through SPDR Gold Shares will see that gold held in London and New York vaults.

What is puzzling is that Singapore also seems to be on the other side of the trend. The World Gold Council's central-bank gold statistics for May 2025 state that year-to-date 2025, Singapore was the second-largest net seller at 10 tonnes, behind Uzbekistan, and that the Monetary Authority of Singapore (MAS) sold five tonnes in May.

Keep in mind that this was when gold, averagely, was about US$3,300 per troy oz. Gold today trades at US$5,000 per troy oz, 50% higher than where MAS was sold it, if this report is true. MAS' own disclosures confirm this: gold holdings fell by 849,000 troy ounces from January 2025 to January 2026.

So, could the Government confirm whether this is true? If so, why does it hold such a contrarian view relative to most global central banks? Does it have a framework for thinking about gold's role in tomorrow's reserve system?

Sir, let me describe what an industrial policy in gold would look like, in five elements.

First, a Sovereign Guarantee. The core asset Singapore can offer is not location or tax rates. It is legal predictability – the credible commitment that asset treatment follows established judicial process, not executive discretion.

We have already done it once before. In January 2020, Singapore enacted the International Organisations (Immunities and Privileges) (Bank for International Settlements) Order. It states that property and assets entrusted to the Bank for International Settlements (BIS), quote, "wherever located, by whomsoever held and in whatever format, are immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure, by any form of legal process."

That is the gold standard, forgive the expression, for custody protection. The question is: why only BIS? Singapore should consider a Reserves Custody Protection Act, or an amendment to the MAS Act, establishing that custody arrangements are governed by Singapore law and due process, immunising it from executive discretion. The principle is legal certainty.

We should be a top choice for jurisdictions seeking diversified custody. Sovereign guarantees are best implemented via sovereign vaults in the same vein as the Bank of England, rather than outsourcing capacity to private parties, as Zurich has done.

Second, a Sovereign Anchor. If 73% of central banks expect to increase gold holdings, Singapore should be among them, not amongst the sellers. MAS reserves held in Singapore vaults create the base load that foreign participants need to see. The Euro dollar market had central banks providing 20% of net demand. We should do the same.

Third, Refining, Sourcing, Verification. It is one thing to have custody, but to have trusted custody requires the above.

Recasting connects markets. Western central banks hold 400-ounce bars. Yet, Asian retail buys kilobars. To connect these markets, you need recasting capacity. You need refineries. Singapore has only one. Dubai built multiple refineries with no mining industry. We should expand refining capacity and establish direct relationships with miners in Africa, Australia, Indonesia, and strengthen existing ones with the bullion banks. Precious metals streaming – providing upfront capital to miners in exchange for future production at agreed prices – is one proven vehicle for building those relationships.

Assaying builds trust. Tungsten has nearly identical density to gold – counterfeits exist. In 2020, China's Kingold was accused of pledging gilded-copper "gold" as collateral for 20bn yuan in loans, turning "gold receipts" into a major credit-fraud event. Robust verification through X-ray Fluorescence (XRF) and ultrasound should be part of the chain, if possible, non-destructively to preserve provenance, but if necessary, destructively by recasting. Not just "is it stored?" but "is it real?" Singapore should build a reputation for rigorous verification that makes our warehouse receipts bankable.

And in our warehouses or vaults, we need strong verification standards, to be able to financialise a wide net of gold collateral, the LBMA-approved and those outside the LBMA system alike. Digital warehouse receipts issued under Singapore standards should be legally enforceable claims.

Fourth, our own standard. The LBMA sets the global Good Delivery standard. It is valuable. We should emulate it. Create a Singapore Bullion Standards Authority. Launch an Asian Good Delivery standard accepted by major exchanges. Competition between standards is healthy. We should aim to make our standard inter-operable with LBMA, possibly as a custody wrapper on top of LBMA.

To illustrate: within the CME Group, gold receives different treatment depending on standard. COMEX warrants are valid collateral for customer accounts, while London LBMA bullion is not. We would be selling liquidity: the guarantee that gold with the Singapore custody stamp can be used as collateral, that banks will lend against it, that it trades on major exchanges.

Beyond custody: liquid markets for price discovery and financing against verified collateral. We can be a multicurrency hub for gold financing – swapping it for US dollar, renminbi, or other currencies of choice.

Fifth, we should revive the GOFO, the Gold Forward Offered Rate, and the derivatives architecture it enables. GOFO was the benchmark interest rate at which banks lent gold. The LBMA published it daily until 2015, when it was discontinued – not because the market no longer needed it, but as collateral damage from the London Inter-Bank Offered Rate (LIBOR) scandal.

Its main practical use was enabling interest rate swaps on gold. Consider a gold producer hedging future production over five years. The conventional instrument is a long-dated forward – locking in a price to sell gold years from now. The problem is that if gold moves from $3,000 to $5,000, the mark-to-market between counterparties swings accordingly, and that exposure sits unsettled for years. The result is large, volatile collateral calls and significant counterparty credit risk.

An interest rate swap solves this by separating the hedge into two components. The price exposure is hedged with short-dated instruments that settle frequently, so credit exposure resets regularly and never accumulates over years. The cost-of-carry component is hedged via the swap, which is long-dated but insensitive to the spot price, keeping its mark-to-market small and stable.

The combined position achieves the same economic result as the forward, but with a fraction of the counterparty exposure. That means smaller collateral calls, lower capital requirements for banks – and a more efficient market overall.

Reviving a GOFO-equivalent benchmark would restore the infrastructure needed for a functioning gold interest rate swap market – giving producers and banks a cleaner, less capital-intensive way to manage long-dated gold exposure, including non-dollar currency pairs.

This would give banks the pricing infrastructure to build gold financing capabilities here.

Even if gold's share of reserves stabilises rather than continues to climb, the infrastructure I describe is not wasted. Sovereign vaults, verified warehouse receipts and derivatives architecture serve any asset class where custody, provenance and financing matter – critical minerals, rare earths, tokenised commodities. Gold is the use case with the most immediate demand, but the platform outlasts any single price cycle.

Sir, in closing. Financial hubs are not natural phenomena. They are built. The British built the Euro dollar market through deliberate policy – forbearance, defence, direct participation, implicit guarantees – at a moment when sterling was in decline and the world's reserve asset was looking for an offshore home.

Our financial centre was built too on deliberate pillars: rule of law, institutional trust, regulatory predictability. For decades, that was enough. Today, not anymore.

Hedge funds we incubated are opening in Dubai. Family offices we courted are diversifying there. Dubai's financial centre doubled its hedge fund count to over a hundred in a single year. They moved on gold, years ago. They will move on the next thing before we have formed a committee to study it. It is not the nature of the standards, but the structural bet.

Singapore won a windfall when Hong Kong shut itself down during COVID-19. That was luck. And luck is a depreciating asset.

Jobs, institutional knowledge, relevance – those are the stakes.

Rule of law, institutions, trust – these are necessary conditions. They are no longer sufficient ones. Other cities have learned to offer versions of the same, combined with speed we have not matched.

Gold is not the whole answer. But it is the question: can Singapore still see a structural shift in the global financial system and build for it, or have we become the kind of country that convenes a review after the opportunity has passed?

Because that is the real risk. That the instinct is lost. That this country becomes mediocre. Because once you become mediocre, derivative, content to be a fast-adopter, there is no bottom to that market. Thank you, Sir.

Mr Speaker, Sir, I thank Mr Kenneth Tiong for his interest in the development of Singapore's financial centre and the potential for us to be a gold trading hub. There is no disagreement with what he has laid out in terms of our ambition. Indeed, that is also something that my colleagues and I in MAS have been looking at, to see what are the opportunities that we can capture, not just in the gold market, but across different parts of the financial centre, which as he mentioned, is multi-faceted, multi-dimensional.

Sir, the evolution of Singapore's financial sector, is not something that has only happened recently. It had started some decades ago and what we have achieved today is the result of sound policy choices, discipline, governance and a long-term view of how finance can serve our economy, our companies and our people.

It is not because of luck. It is because of many years of hard work, together with the industry, that we have put in place these pillars of strength.

Sir, our financial sector contributes around 14% of gross domestic product in 2025. Between 2021 and 2025, it grew at an average of 4.6% annually, with positive spillovers to other sectors, including professional services and infocomm technology (ICT).

Today, the financial sector employs almost 200,000 people, more than 80% are locals. Over the past decade, the Singapore financial sector workforce grew by more than 40,000 – and about 90% of the net jobs created went to locals.

Several factors have underpinned this positive outcome, which has benefited Singapore and many Singaporeans.

First, Asia's continued growth and sustained development over the years have created strong demand for capital and international companies which are keen to tap into the region's growth opportunities. This has led to financing opportunities for financial institutions and investment opportunities for both global investors who are seeking access to Asian markets and also Asian investors who are looking to diversify their portfolios globally.

Second, a sound and progressive regulatory regime, which safeguards financial stability and ensures that financial institutions in Singapore adhere to high prudential and regulatory standards and practices.

Sir, Mr Tiong mentioned about Dubai and the approach that Dubai has taken. I think we recognise the different financial centres will have different market niches that they want to target, different strengths that they play to. And Singapore's strengths and Dubai's strengths may not be exactly the same, the markets that we target may not be exactly the same. But I think the international financial markets, the scale is large enough for there to be more than one international financial sector.

So, Dubai can be a strong, good financial centre and so can we. And we can serve different roles, serve different customers and we both grow together. It is not a zero sum. It is not a zero sum.

Sir, as the global financial landscape evolves, the important point is that our policies will have to adapt to stay fit for purpose. MAS has been working closely with the industry on this so that we know what the opportunities are and therefore, what are some of the policies that we will have to look at.

For example, we granted banking licences to four digital banks, which have added diversity and competition to our banking system and provided consumers and also  underserved segments of population with greater product offerings.

A second example is our FinTech Regulatory Sandbox, which enables firms to experiment with innovative products and business models in a controlled regulatory environment, within time-bound relaxations and subject to appropriate safeguards. This encourages experimentation while containing risk, helping firms to innovate by taking calculated risks and also pushing the boundaries.

And third, talent. Our competitive edge lies in developing a strong core of local talent as well as attracting complementary professionals from abroad. This combination allows us to build an internationally competitive and innovative financial ecosystem.

Sir, MAS does not only carry out regulatory functions. We have been driving the development of Singapore's financial sector for many years.

First, deepening our strengths in key asset classes. Beyond our role as a leading regional banking and insurance hub, Singapore has grown to become a major pan-Asian asset management centre with more than 1,200 licensed fund management companies managing over $6 trillion in assets.

We are working with the industry to expand these capabilities, including in private equity and private credit, to better serve the growth capital needs across Asia.

Singapore is also the third largest foreign exchange centre in the world, with over US$1.4 trillion traded here every day.

Next, strengthening horizontal enablers, such as the use of technology. Through various grants, MAS has supported the establishment of over 15 innovation labs by our financial institutions and major technology players. And this has funded more than 50 projects and proof-of-concepts, including in artificial intelligence (AI), quantum technology and cross-border payment linkages with regional partners. These initiatives enable financial institutions to harness technology to stay competitive in a rapidly changing industry.

Let me talk about talent development, which is very critical. People are at the heart of everything we do, and the financial sector is a key provider of good jobs for Singaporeans.

MAS has launched schemes to build workforce competencies, and to develop specialist talents and leaders in finance. For example, in partnership with the industry, we have trained over 8,000 finance professionals in sustainable finance, covering priority roles, such as credit risk analysts and corporate banking relationship managers. We are also uplifting and upskilling our workforce to make good use of AI, helping our institutions to harness technology to augment jobs and enabling our workers to be more productive so that they can do higher value-added work.

Fourth, co-creating solutions with industry partners. We adopt a collaborative approach which ensures that policies and development initiatives are aligned with market realities and can play to our strengths. And one of Singapore's strengths, which investors look to, is that we are a trusted place, stable and they can make long-term plans. So, I think, in what we do, we have got to bear that in mind. Do not erode our strengths. Because that is what differentiates us from other financial centres.

Sir, I would like to also add that when we do our plans to develop the financial sector, we study global best practices and we do pick up useful ideas that have been implemented elsewhere. And we are mindful that different financial centres have different context, key propositions and key customer segments.

But I do welcome the suggestions that Mr Tiong mentioned earlier about the gold market. Because, as I said, that is also something that we hope to do. Our objectives do not differ. And we thank him for his suggestions. Certainly, I will take on board what he has mentioned in his speech to see whether those are ideas that we can also implement to strengthen our position here as a gold trading hub.

Sir, let me conclude my speech. Singapore's financial sector has made much progress over the years as a trusted global hub and international financial centre. But we are certainly not resting on our laurels, and we are not done building and growing our financial services industry.

We believe that there is still a lot more we can do and the way that we want to move forward is to work very closely with our industry, because I believe that is also one of our strengths. The barriers between the Government and the industry here in Singapore, we do not have very tall and rigid barriers. We work very closely with our industry partners. We share ideas, we explore new possibilities, we test out what are some of the ideas that we can implement that will benefit the industry. And this is how we have done the review for the equities market, including what the Prime Minister just mentioned in the Budget speech, about the equities market development programme.

The approach that we intend to take, whether for the gold market or for the other segments of the financial centre, would be the same – work closely with the industry, listen to feedback, be open to new ideas and then take calculated risks and be willing to move, be willing to make bold decisions. Some of the things that we try may not succeed, but we must try. And for those that we try and succeed, it may allow us to take off. And in the end, benefit our economy, benefit our companies but most importantly, benefit our people.

Sir, my MAS colleagues and I will continue working closely with our industry partners to expand and grow our financial sector, deepen our capabilities, develop our talent base and strengthen our connections with other markets. Together we will drive innovation, sustain our competitiveness and create more good jobs for Singaporeans in the years ahead. [Applause.]

*Question put, and agreed to.*

*Resolved, "That Parliament do now adjourn."*

Adjourned accordingly at 5.29 pm.