Singapore is known for making shrewd decisions on everything from state investing to urban planning. It is a modern success story that many countries have tried to emulate. The city-state punches well above its weight as a global financial hub and attracts plenty of companies and talent to its shores as a result.
One development that many observers are watching closely is how Singapore is positioning itself as a hub for the volatile world of cryptocurrency. While China has taken a tough line on cryptocurrency trading and mining, Singapore has a more receptive, if cautious, approach. It hasn’t banned cryptocurrency trading, although it is laying down plenty of regulations to protect retail investors when buying digital currency.
It’s too early to say whether Singapore’s latest move – the recent Financial Services and Markets Act – will discourage others from setting up operations in the city. Previous legislation only covered businesses based and operating in Singapore. Now the net has been cast wider and requires crypto providers created in Singapore but conducting business overseas to be licensed and subject to Singapore’s anti-money laundering rules.
There’s a grey area when it comes to trading firms and brokerages set up in one location but which don’t actually do any business there. Often there is confusion over whose laws the firm must abide by, as it operates in one jurisdiction but is based in another. However, the Monetary Authority of Singapore (MAS) felt it needed to act and offer some clarity.
The new law gives the financial regulator the power to conduct inspections of digital token service providers doing business overseas, and also to assist foreign regulatory bodies and agencies in conducting investigations. It shows just how proactive Singapore has become in its bid to create a robust cryptocurrency ecosystem that stands out from its Asian neighbours – Indonesia, Thailand and China have all gone for trading bans instead.
The new law could dim Singapore’s crypto attractions but boost the credibility of those players that remain
Singapore has aspirations to become a global crypto hub. By taking its time to build a strong legal framework and foundation for crypto providers, it hopes to attract the right kind of firms.
At the end of the day, cryptocurrency trading is not for the faint-hearted, and Singapore doesn’t want to get its fingers burnt, or its citizens’, by allowing less scrupulous providers to operate in its jurisdiction. Although Singapore has already become a popular destination for crypto and blockchain businesses, wild price swings and sell-offs have made the city-state’s financial regulator cautious.
While the new law could dim the attractions of Singapore as a crypto hub, it could also boost the credibility of those players that remain in Singapore, given the stricter regulatory requirements and MAS oversight they will be subject to.
Earlier this year, the MAS issued guidelines that cryptocurrency service providers should not promote their services to the general public. On top of this, the financial watchdog denied applications from more than 100 cryptocurrency firms wanting to set up in Singapore. The message is clear: we only want squeaky-clean crypto providers here.
The advertising ban means ads in shopping malls and on public transport, websites and social media aren’t allowed. Singapore is also considering other measures to protect consumers although it still wants to develop its digital asset sector. It is a difficult balancing act, but one the financial hub is capable of accomplishing.
It was interesting to see how the crypto advertising ban played out at this year’s Singapore Grand Prix, as crypto providers were allowed to advertise only on the drivers’ cars and uniforms, and not on the more noticeable hoardings around the track. As a result, the hoardings remained dominated by traditional brands such as Heineken, Singapore Airlines and Rolex.