China’s latest crypto crackdown —its strictest yet — has resulted in swift reactions from industry players as they scrambled to halt services and exit the world’s most populous country.
Chinese cryptocurrency exchange Huobi — one of the world’s largest by trading volume — has stopped new account registrations and will close the accounts of existing Chinese users by the end of the year. Other platforms such as BitMart and BiKi have announced similar measures. The websites of crypto data providers CoinGecko and CoinMarketCap are now no longer accessible in China.
Crypto communities on Chinese social media platforms such as Weibo have also announced their move to alternative platforms such as Twitter, Discord or Telegram. It is not just social media users who are migrating. Earlier clampdowns have led to crypto miners fleeing China and the latest crackdown has sparked a new wave of exodus — to Singapore.
Exodus of Chinese crypto entrepreneurs and companies
“We will see an increasing exodus of Chinese crypto entrepreneurs, and I believe it will lead to a diffusion of crypto technology in Southeast Asia and accelerate the rise of Southeast Asia as a hotbed of crypto innovation,” wrote Lily Z. King, COO of a Singapore-based crypto custody and asset management platform, in a recent Forkast.News commentary.
“Since this May, many crypto companies from China have already established offices in Singapore. There is already a vibrant Chinese crypto community there, so it will be easy for those who move from China to Singapore to adapt quickly,” King wrote. “Singapore is the new base, and Southeast Asia is the new crypto playing field full of potential.”
Singapore, an emerging crypto hub in Asia
Singapore — an island city-state of 5.45 million people situated at the southern tip of the Malay Peninsula — has long been a trading hub, even before it became a British trading post in 1819.
A key financial center in Asia, Singapore has embraced fintech and adopted a progressive stance towards crypto trading and ownership. The Monetary Authority of Singapore (MAS) in 2019 passed legislation, which came into force in January 2020, to regulate the crypto industry under its Payment Services Act (PS Act) primarily for money laundering and terrorist financing risks.
Under Singapore’s PS Act, providers of digital token payment services — including cryptocurrency exchanges — must be licensed. According to MAS, 170 license applications by digital payment token service providers were submitted. Thirty applications were withdrawn after engagement with MAS, and two were rejected. MAS has to date granted licenses to FOMO Pay, a Singapore-based payments fintech, DBS Vickers, the brokerage arm of DBS Bank, and Independent Reserve, an Australian cryptocurrency exchange.
The country is already home to many Chinese crypto entrepreneurs and companies, including Changpeng Zhao, CEO of Binance, the world’s largest cryptocurrency exchange that was originally founded in China. In September, MAS put Binance.com on its investor alert list but Singapore residents are able to use the Binance Singapore version of the platform.
Other cryptocurrency exchanges with roots in China such as Bybit, Huobi, OKCoin also have operations in Singapore and the country is fast becoming a crypto hub as many Chinese crypto executives move to Singapore amid China’s crackdown. This year’s cohort for the Executive MBA program at the National University of Singapore Business School includes high-profile names in the Chinese crypto industry like Huobi co-founder Du Jun and He Jinkai, head of custody at Binance.
Crypto companies from Hong Kong, too, including crypto finance unicorn Amber Group, have also recently set up shop in Singapore. Hong Kong-based digital asset group Hashkey and crypto exchange Crypto.com are currently operating in Singapore with an exemption under the PS Act. The exemption allows entities to provide services while their license applications are being processed, and will cease when an entity’s license application is approved, rejected or withdrawn.
U.S. crypto companies such as Nasdaq-listed crypto exchange Coinbase, crypto exchange Gemini and blockchain payments company Ripple Labs are also currently operating with an exemption in Singapore, the Asia Pacific base for several crypto companies.
Industry experts tell Forkast.News that Singapore’s progressive stance toward crypto has been a key deciding factor for locating their operations.
“Singapore provides the regulatory clarity with various regulations for different kinds of crypto activities (payment tokens, securities, custody, crypto fund management, etc.). Naturally that would be attractive for any crypto companies, whether from China or elsewhere, to consider setting up shop in Singapore,” Chia Hock Lai, co-chairman of Blockchain Association Singapore, told Forkast.News in an email.
“At a minimum, Singapore would be an ideal place for hub activities including tech and R&D,” Chia added. “Crypto companies by now are well aware that while there is regulatory clarity, the requirements are also quite stringent and MAS is always ready to take enforcement actions against players who do not play by the rules.”
As the fast-growing crypto industry evolves, regulations too will need to keep pace.
In a recent interview, Sam Bankman-Fried, CEO of crypto derivatives exchange FTX, told Forkast.News that FTX was considering applying for a license in Singapore and was specifically looking into how crypto derivatives regulation might unfold. “As of now, there isn’t a regime for crypto derivatives. They’re unregulated in Singapore as of now,” Bankman-Fried said. FTX, which recently moved its headquarters from Hong Kong to the Bahamas, is currently not licensed or exempted from holding a license by MAS.
“We’ve seen really forward-looking statements from Singaporean regulators and have been really impressed with how MAS has approached this matter. That’s something that we see as a potential hub,” Bankman-Fried said. “We definitely want to see how everything plays out, and we may look to attempt to get a license there and to establish something there.”
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