Singapore, touted as one of the most open economies in the world with free approaches to international trade, is reshaping its image as a crypto hub.
Singapore was once the go-to destination for cryptocurrency firms leaving China since they were ousted from the mainland from 2017 due to intensifying crackdowns. But with the “crypto hub” image came increased retail activity that is now pushing the Monetary Authority of Singapore (MAS) to step in.
“MAS has consistently warned the public that investing in cryptocurrencies is highly risky as investment products and not suitable for the general public,” a spokesperson for the central bank told Forkast in an emailed response. “Singapore is not alone in holding this view — some jurisdictions have also taken measures in relation to advertising by crypto firms.”
MAS issued guidelines in January to restrict cryptocurrency service providers from marketing or promoting their services to the general public. Singapore now has a highly selective approach in moving towards the regulation of digital assets.
Andrew M. Bailey, associate professor at Yale-NUS College in Singapore and a fellow at Bitcoin Policy Institute, told Forkast: “Singapore’s regulators are increasingly distinguishing between retail activity and institutional activity and they are far more friendly to the second than the first.”
One of the reasons for the differentiation may be uncertainty over Singapore’s next prime minister. “So until that is settled there are a number of policy agendas that I think remain somewhat ambiguous. And so what regulators are doing now is taking a somewhat cautious and conservative route, waiting for further direction,” Bailey said.
But for institutional investors, Singapore is more lenient. Local crypto products have been made available first for institutional over retail. For instance, the banks in Singapore that have either rolled out or are rolling out crypto products of various kinds, make them available first to accredited investors and institutions.
“I think the Monetary Authority there has been willing to engage with crypto but not necessarily adopt it,” Asian Market Sense founder Andrew Sullivan told Forkast. “It became a hub when China banned crypto. [However,] Singapore’s willingness to engage and set out public rules makes it attractive for individuals. Few others are as open which means investors have fewer protections.”
A case in point is the digital exchange platform Tokenize Xchange. In Singapore, the firm currently operates under an exemption from MAS, and has applied for a Digital Payment Token License. The exemption is in force until the application is approved or rejected by MAS, or withdrawn by the applicant.
In Singapore, cryptocurrency exchanges are required to be licensed and supervised under the city-state’s Payment Services Act (PSA), primarily for money laundering and terrorism financing risks.
Since the commencement of the Payment Services Act (PS Act), which came into effect in January 2020, around 170 applicants have applied to provide DPT services. But only four financial institutions have been granted licenses so far, according to the MAS website.
Hong Qi Yu, CEO and founder of Tokenize, told Forkast the firm has been waiting for its license in Singapore for two years now and the wait is primarily due to a long list of applicants. “Although we haven’t received our license yet, everything is still business as usual. So we don’t find it disturbing,” he said.
This year, Tokenize will shift focus to institutional investors, family offices, and high net worth individuals as a response to the MAS marketing restrictions. As of last year, about 80% of Tokenize’s investors were from the retail sector while the remaining 20% were institutional. Hong expects a 50-50 split to occur in the next 18 months as high price volatility in crypto is slowing down retail activities.
“From a business and institutional investment standpoint, Singapore can still be considered a crypto hub of major significance in Asia. However, from a retail adoption perspective other “crypto hubs” spring to mind, whether it’s the Philippines for community participation in DeFi, or Hong Kong as a hub for NFT products and uptake,” Ben Caselin, head of research and strategy at cryptocurrency exchange AAX, told Forkast.