Singapore becomes a cryptocurrency "safe haven": the first batch of trading platforms have received "in-principle approval"

A few years ago, central banks around the world began to frown upon cryptocurrencies, including Bitcoin, but did not make any major moves. However, cryptocurrencies may face a "cold winter" in the near future.

The suppression of the entire cryptocurrency ecosystem has extended to cryptocurrency trading platforms. Binance Payment has been largely restricted in the UK, and supervision has spread from London to Brussels, Hong Kong and other places, penetrating to Kuala Lumpur. The two major parties in the United States, which have always disagreed on many issues, have also found common ground on the issue of cryptocurrency. New Jersey and other states have recently targeted the cryptocurrency platform BlockFi, accusing its accounts of constituting an unregistered securities offering and requiring it to immediately stop providing the product.

Firm supporters, profit-seeking traders, and cryptocurrency stakeholders are beginning to turn their attention to the tolerant land of Singapore, where Binance, Ethereum, Gemini, etc. are all here.

Faced with the "immigrants" of cryptocurrency, Singapore, which prides itself on its "financial openness", is faced with a dilemma while insisting on its own position: allowing its development will go against the attitudes of major countries such as Europe, the United States, and China, and it may face global pressure in the future; but if it joins the latter's camp, it may miss out on financial technology opportunities.

The first batch of trading platforms have been approved in principle and are in the process of approval

Singapore appears to have made its choice, or at least tested it.

On August 2, local time, Australian cryptocurrency exchange Independent Reserve announced that it had obtained the "in-principle approval" from the Monetary Authority of Singapore (MAS) under the Payment Services Act (PSA), allowing it to become a regulated digital payment token (DPT) service provider.

According to the Independent Reserve statement, the company is not the only institution to receive an approved license. "As one of the first cryptocurrency exchanges to be approved by MAS in-principle license, this reflects our good daily operation policies, procedures and risk control systems. It also provides certainty for industry participants and security for customers."

Several cryptocurrency trading platforms told the 21st Century Business Herald reporter that from a global perspective, Singapore's attitude has always been friendly.

Wang Haifeng, a senior researcher at OKLink Research Institute, told reporters that Independent Reserve, as one of the first platforms to receive "approval in principle", demonstrates and confirms the positive and friendly attitude of Singapore regulators towards related fields. "In fact, as early as November 2018, Singapore expanded its regulatory system and implemented a compulsory licensing system. In the long run, it will be beneficial for related companies to carry out innovative services within the regulatory framework. Especially in the context of stricter global regulation, Singapore has become a hotbed for blockchain innovation and development."

Earlier, Singapore's Senior Minister and Monetary Authority of Singapore Chairman Tharman Shanmugaratnam said at a meeting on July 26 that several applicants were entering the final verification stage to obtain a license as a digital payment token service provider.

“Since the Payment Services Act came into effect in January 2020, about 170 digital token trading platforms have applied for digital payment service licenses,” he added. “After further engagement with them by MAS, 30 applications were withdrawn and two applications were rejected. Currently, about 90 service providers continue to operate under license exemptions.”

In January 2020, the Payment Services Act (PSA) officially came into effect, requiring all DPT service providers operating in Singapore, including crypto exchanges, to register and obtain a license. The new Payment Services Act expands the regulatory scope of MAS to include new payment services such as digital payment token services, and screens its customer protection mechanisms, transactions and compliance structures to ensure that payment companies comply with anti-money laundering (AML) and counter-terrorism financing (CFT) requirements.

In response, Independent Reserve said that in order to obtain a license, virtual asset service providers must implement controls to ensure appropriate due diligence and adequate risk disclosure.

The Payment Services Act clarifies the licenses for digital tokens for the first time. Depending on the nature and scope of the services provided, payment service providers need to apply for a "currency exchange" license, a "standard payment institution" license, and a major payment institution license, depending on their respective circumstances. According to the Act, the eligibility requirement for license applications is that at least one of the company's directors is a Singaporean or a permanent resident living in Singapore. This means that it is much easier for cryptocurrency exchanges to establish services in Singapore.

However, MAS has not approved any crypto licenses so far, and DPT service providers have been operating under the PSA exemption of holding a license. At this stage, entities and companies that have obtained exemptions include Huobi, OKCoin, Bitstamp, Coinbase, Ripple and BitGo.

"In-principle approval is actually formal approval," a person related to a cryptocurrency platform told reporters, "It just needs to complete the process and formalities."

Singapore goes against the tide, financial risks should not be underestimated

One man's honey may be another man's poison. Singapore has gradually absorbed some of the dividends of Hong Kong, another fellow Asian financial center. Although the epidemic has put heavy pressure on most economies, it has little impact on Singapore's absorption of financial factors.

Although MAS has always been friendly to cryptocurrencies, it is also facing a dilemma. Cryptocurrencies may be a blue ocean of technology and an opportunity for further development of Singapore's finance. Tourism and technology finance are the two key pillars for Singapore, which is short of resources, to attract funds. Now the situation is right, and cryptocurrency platforms are pouring in one after another, and the speed and scale may expand. If the potential of the cryptocurrency industry in attracting funds, technology and personnel is ignored, Singapore may miss the opportunity.

But another realistic problem is that if the Singapore authorities go against the trend and insist on creating a relatively friendly regulatory environment, it will not only run counter to Hong Kong, mainland China and other major countries, but the potential illegal activities and financial stability risks brought by cryptocurrencies cannot be underestimated.

Regarding Binance, a popular target of global regulation, MAS only said that it will follow up. "We will follow up on Binance Holdings Limited's subsidiary in Singapore as required. We are aware of the actions taken by other regulators against Binance and will take appropriate follow-up actions," MAS said.

Binance CEO Zhao Changpeng has moved the platform to Singapore to temporarily avoid the limelight from rounds of regulation, and simultaneously posted recruitment information on LinkedIn. According to Financial Times, Vitalik Buterin, the founder of the cryptocurrency Ether, is also here.

In June this year, the US cryptocurrency trading platform Gemini chose Singapore as its Asian headquarters and appointed Jeremy Ng as the head of Asia Pacific, based in Singapore. Gemini said it will apply for a license from the Monetary Authority of Singapore (MAS) under Singapore's Payment Services Act 2019 as part of its global expansion strategy.

“Singapore is a major financial center in Asia with a large number of clients, especially in the private wealth sector. We have had conversations with many wealth management companies, and everyone needs a cryptocurrency solution,” said Jeremy Ng. “Retail and institutional clients in the Asia-Pacific region can buy, sell, store and earn more than 40 cryptocurrencies, and support fiat currency conversion for SGD, AUD and HKD.” Gemini is currently working with SingPass to simplify the process for Singapore residents to open accounts at Gemini while ensuring security and compliance.

In addition to being a safe haven for platforms, MAS's friendly attitude is also reflected in the fact that it has stated that it will provide assistance to cryptocurrency investors in case of losses, which is obviously much more responsible than the eurozone.

"Bitcoin and other cryptocurrencies have absolutely no value support, and investors face the risk of losing a large amount of money or even all of it." This is the official rhetoric of the European Central Bank (ECB). It may mean that once the interests of cryptocurrency investors are damaged, the central bank is unlikely to provide corresponding support.

On May 10, local time, MAS Chairman Tharman Shanmugaratnam said in response to "what measures will be taken to limit retail investors' exposure to crypto asset trading and investment" that MAS has repeatedly warned that investing in cryptocurrencies is risky and not suitable for retail investors. The prices of most cryptocurrencies are subject to speculative fluctuations. "If individuals are in debt after investment or financial losses, they may be directed to the Singapore Credit Counseling Company, which will work with them to understand their financial situation and assist them in reaching appropriate debt repayment arrangements with creditors."

“In my opinion, Singapore’s attitude has always been tolerant and firm,” said a cryptocurrency analyst, “but it is inevitably subject to a series of external pressures.”

On June 28th, local time, MAS President Ravi Menon delivered a speech on "Decentralized Finance and the Future of Currency". He said that compared with the current centralized system, technology is making a completely different way of financial infrastructure possible. Decentralized financial infrastructure and open crypto networks can also potentially enhance inclusiveness and innovation. When companies of all sizes and even individuals can directly access financial infrastructure, more competition and inclusion can emerge.

The central bank-backed digital currency (CBDC) was mentioned twice in this speech, and the above content can be regarded more as an official statement on digital currency/virtual currency.

“The key question about the future of money is: What is the appropriate division of labor between the public and private sectors?” says Ravi Menon. “At one extreme is a completely centralized system, where there is only central bank money; at the other extreme is a decentralized system, where there is only private money in circulation.” In his view, each country must choose a different position on this continuum, given its respective cultural norms, social contracts, and institutional structures.

“Stefan Ingves (Governor of the Swedish Central Bank) once told me that, at the end of the day, this is not even a monetary question. The future of money is too important to be left entirely to central banks,” he added.

Even though MAS has opened up a convenience for the first batch of license applicants this time, cryptocurrency traders still can't help but worry about whether MAS will be stingy with licenses and whether the relaxed regulatory area will continue?

“We hope that the government and regulators will clarify what digital asset service providers can and cannot do. Clear and bounded supervision is a good start and catalyst for development,” said a person in charge of a cryptocurrency trading platform.