Singapore is often considered Asia’s largest cryptocurrency hub because of its position as a financial hub, reputation for flawless governance and strict rule of law. However, the situation seems to have evolved over the last few years as the country’s central bank and financial supervisor,Monetary Authority in Singapore (MAS), has adopted increasingly stringent measures to regulate the crypto sector.
The Executive Order on the Establishment of a Legislative Framework called “Digital token license”In the country first excited the crypto industry. But players in the sector encountered many difficulties very quickly: by the end of 2021, among a hundred companies that had applied for a license to offer services related to cryptocurrencies from MAS, only five obtained the required permits. It can be noted that the big names in the crypto sector are absent from the list (Coin base, twin…). As for Binancemade the stock market a strategic shift by ending its activities as a stock market and refocusing around a blockchain innovation hub.
Subsequently, in January last year, MAS published a document entitled “Guidelines to discourage cryptocurrency trading by the public(Guidelines aimed at discouraging trading of cryptocurrencies by the general public), which states that although it strongly encourages the development of blockchain technology and innovative use cases for cryptocurrencies, “trading is an unsuitable risky activity to not be suitable for the general public. “
In the same year, the bill became “Financial services and market accounting“Adopted in April:
- assigns new powers to MAS, which may prohibit persons deemed unfit to perform key roles, functions and activities from working in the areas of payments and risk management;
- raises to SGD 1 million (USD 738,000) the maximum fine that can be imposed on financial institutions that disrupt their services.
MAS now has one of the most stringent licensing processes for digital asset services in Asia with Japan.
“It must be because we want to be a responsible global crypto-hub with innovative players, but also with strong risk management capabilities,” said the central bank’s CEO. Ravi Menonduring the Financial Times Crypto and Digital Asset Summit.
Mr. Menon explained that MAS performs background checks on applicants and checks whether they have strong corporate governance structures. They should also be aware of the risks of money laundering and terrorist financing: according to him, while cryptocurrencies do not currently pose a threat to the financial system, there are risks associated with money laundering and terrorist financing.
Patrick Chiufounder of AP Capital, a Hong Kong-based investment fund, told Coindesk that the requirements for obtaining a license are difficult to meet: for example, one of the requirements for KYC / AML is face-to-face checks, which is not within the reach of all companies. It is also required that cryptocurrencies only circulate in a network of authorized wallets in the country.
Nevertheless, Singapore undoubtedly wants to continue the expansion of the crypto sector, but retain control of it. MAS ‘participation in the Dunbar project developed by Bank for International Paymentsin cooperation with Reserve Bank of Australiathat Bank Negara Malaysia and South African Reserve Bank, is an example of the direction Singapore wants to take. The Dunbar project focused on implementing a platform that could enable international settlements using digital currencies issued by several central banks. The platform is designed to facilitate direct cross-border transactions between financial institutions in different currencies with the potential to reduce costs and increase speed.
The future of the crypto sector in Singapore is still difficult to determine. What is certain, according to a general perception, is that decentralized finance (DeFi) in its current form will not be able to develop in Singapore if digital assets cannot leave white-listed wallets. With the ban on Bitcoin ATMs, the use of cryptocurrencies is also becoming more complicated. Singapore will have much to do to continue attracting crypto investors to the country.
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