Singapore seeks to cement itself as a global cryptocurrency hub
- Monetary Authority of Singapore MD Ravi Menon said the city state risked being left behind by not getting a head start in how to handle cryptocurrency
- ‘Strong regulation’ is being put in place and 170 companies have applied for a licence, with only three, including DBS Holdings, receiving one
“We think the best approach is not to clamp down or ban these things,” said Ravi Menon, managing director of the Monetary Authority of Singapore, which regulates banks and financial firms.
Instead, MAS is putting in place “strong regulation” so firms that meet its requirements and address the multitude of risks can operate, he said.
Nations differ vastly when it comes to how they handle cryptocurrency: China has cracked down on large amounts of activity in recent months, Japan only recently allowed dedicated cryptocurrency investment funds – though El Salvador has embraced bitcoin as legal tender. In the US, while there are an abundance of options for investing in the burgeoning asset class, regulators are concerned about everything from stablecoins to yield-generating products.
“With cryptocurrency-based activities, it is basically an investment in a prospective future, the shape of which is not clear at this point,” said Menon, who has helmed the MAS for about a decade. “But not to get into this game, I think risks Singapore being left behind. Getting early into that game means we can have a head start, and better understand its potential benefits as well as its risks.”
The stakes are high for the small island nation, which has already earned a reputation as a global wealth hub. Singapore must raise its safeguards to counter risks including illicit flows, Menon said.
The city state is “interested in developing cryptocurrency technology, understanding blockchain, smart contracts and preparing ourselves for a Web 3.0 world,” he said, referring to the third generation of online services, which will be a key theme during the Singapore Fintech Festival that MAS will host next week.
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Menon acknowledged that banks and other financial institutions will face certain challenges with the decentralisation of finance. Still, Singapore wants to be “well positioned” for 2030 when “an economy of tokenisation” may come, he said.
Singapore is not the only place with cryptocurrency ambitions. Locations as diverse as Dubai, Miami, El Salvador, Malta and Zug in Switzerland, are also making efforts. It can be a fine line to tread, given the cryptocurrency industry grew up with few regulations, so many players balk at government officials’ attempts to impose crash barriers.
Singapore’s approach has attracted cryptocurrency firms from Binance Holdings, which has had a series of run-ins with regulators around the world, to Gemini, a US operator targeting institutional investors, to set up base.
Some 170 companies applied for a MAS licence, taking the total number of firms seeking to operate under its Payment Services Act to about 400, after the law came into effect in January 2020.
Since then, only three cryptocurrency firms have received the much-coveted licences, while two were rejected.
About 30 withdrew their application after engaging with the regulator. Among those approved is the brokerage arm of DBS Group Holdings, Singapore’s largest bank, which is also a pioneer in setting up a platform for trading of digital tokens while offering tokenisation services.
The regulator is taking time to assess applicants to ensure that they meet its high requirements, Menon said. The MAS has also boosted resources to cope with high volumes of prospective services operators, he said.
“We don’t need 160 of them to set up shop here. Half of them can do so, but with very high standards, that I think is a better outcome,” he said.
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Menon said the benefits of having a well-regulated local cryptocurrency industry could also extend beyond the financial sector.
“If and when a cryptocurrency economy takes off in a way, we want to be one of the leading players,” he said.
“It could help create jobs, create value-add, and I think more than the financial sector, the other sectors of the economy will potentially gain.”
