The Monetary Authority of Singapore sees retail participation in crypto still as a risky prospect, and believes further legislation is required. With that said, it believes in “issuing guidelines before using legislation.” In other words, enforcement doesn’t come first. Regulation should not stifle innovation, nor should innovation ignore regulation.
This is according to new analysis from Sean Lee, Senior Advisor at the Crypto Council for Innovation. It follows news from the Monetary Authority of Singapore that banning crypto in retail won’t work.
“Risks should be categorized and considered separately and independently (money laundering vs cyber vs consumer protection),” said Lee. “International engagement with other jurisdictions is important as blockchain and crypto networks are inherently global and country specific restrictions can only go so far. The licensing regime will continue to be stringent but more international players are expected to receive approval.”
This step shows that DeFi is part of the future and cannot be brushed aside. It will coexist with TraFi depending on usage, Lee explained.
Singapore’s cryptocurrency regulation regime is in the spotlight as the MAS has been polling firms applying for its Digital Payment Network licenses (see below). The regulator is known to be seeking more granular information about the business activities and holdings of the cryptocurrency brokers, banks and fund managers that are applying locally. This follows on from the problems with cryptocurrency hedge fund Three Arrows Capital, which migrated its domicile from Singapore to the British Virgin Islands before it imploded.
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Singapore leads APAC region, views crypto as fundamental to growth
As a jurisdiction considered neutral to both the US and China, Singapore leads the APAC region when it comes to comprehensive crypto regulations. Native network tokens are mostly recognized as Digital Payment Tokens (DPT) under Payment Services Act (PSA), as opposed to a blanket securities or commodities designation in other jurisdictions. Singapore is already recognised as the wealth management capital of Southeast Asia, and with Hong Kong still maintaining quarantine restrictions, is pushing to become the wealth management capital of all Asia. It has an important role to play in the further evolution of Asian cryptocurrency markets.
“Singapore views blockchain and crypto-based technologies as fundamental to economic growth, and is active in education and funding within both the private and public sectors,” said Lee.
It is evident that the MAS is seeking to tighten up its regulatory regime for cryptocurrencies in light of the issues around 3AC. It has fielded over 200 applications for its DPT licenses but has granted only 10 so far, including to Crypto.com and DBS Vickers. In July it stated that it was focusing on areas like consumer protection, market conduct, and reserve banking for stable coins.
Currently token service providers are still not required to safeguard customer funds in Singapore from insolvency risks.
Ravi Menon, Managing Director of the MAS, said at the end of August: “We are taking a four-pronged approach to building the digital asset ecosystem. First, explore the potential of distributed ledger technology in promising use cases; second, support the tokenisation of financial and real economy assets; third, enable digital currency connectivity; and fourth, anchor players with strong value propositions and risk management.”