Singapore is looking to make itself a significant player for cryptocurrency-related businesses as the major financial centers across the globe grapple with approaches to handle one of the fastest-growing sectors of finance.
“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.
Apart from that, MAS is also putting in place a strong regulation so that the firms that meet its requirements and address multiple issues and challenges with the multitude of risks can operate easily.
Nations differ at a fast rate when it comes to how they used to handle Crypto: China has also cracked down a large amount of activity in recent months, Japan has also allowed dedicated crypto investment funds with the help of EI Salvador that has also embraced Bitcoin as a legal tender. In America, while there is an abundance of options for investing in the asset class, regulators are highly concerned about everything starting from stablecoins to yield generating products.
“With crypto-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 going to earn a reputation as a global wealth club. Singapore must even secure its safeguard to counter risks which include illicit flows.
The city-state is also interested in developing the crypto latest technology, which understands blockchain, smart contracts and preparing ourselves for a web version 3.0.
Menon also acknowledged that banks and some other financial institutions would also use to face certain challenges with the decentralization of finance. Moreover, Singapore wants to be well-positioned for 2030 when an economy of tokenization may come.
Singapore is not the only place with crypto ambitions. Locations as diverse as Malta, Dubai, Miami, EI Salvador and Zug in Switzerland are also making efforts. It can be a fine line to tread, given the crypto industry grew up with certain regulations, so that many players baulk at the government officials attempts to impose guardrails.
Singapore approach has also attracted various crypto firms, from Binance Holdings Inc, which has had a series of run-ins with the regulators across the globe, to Gemini, a US operator targeting institutional investors, to set up a different set of base. Some 170 companies applied for the purpose of MAS license, which takes the total number of firms seeking to operate under its Payment Services Act to around 400, after the law came into effect in the month of January 2020.
Since, then only the three crypto firms have also received the much-coveted licenses, while two were rejected. Around 30 withdrew their applications after engaging with the different sets of regulators. Among those approved is the brokerage arm of the DBS Goldings Limited, which is Singapore largest bank, which is also significant in setting up a platform for trading digital tokens while offering tokenization services.
The regulator is also taking a proper time to assess applications to make sure that they meet its high time requirements, the Menon said. The MAS has also boosted various resources to cope up with the large set of volumes of prospective services operators.
“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.
Menon said the benefits of having a well-regulated local crypto industry could also extend beyond the financial sector.
“If and when a crypto 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.”