Singapore seeks to consolidate itself as a key player for cryptocurrency-related businesses as financial centers around the world grapple with approaches to manage one of the fastest growing areas of finance .
“We believe the best approach is not to crack down or ban these things,” said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), which regulates banks and financial companies.
Instead, MAS is putting in “strong regulation” so that companies that meet its requirements and deal with the multitude of risks can operate, he said in an interview.
Nations differ widely in how they handle crypto: China has clamped down on large amounts of activity in recent months, Japan has only recently authorized dedicated crypto investment funds – although ‘El Salvador adopted Bitcoin as legal tender. In the United States, while there are many options for investing in the burgeoning asset class, regulators are concerned with everything from stablecoins to yield-generating products.
“With the crypto-based business, this is essentially an investment in the prospective future, the form of which is unclear at this point,” said Menon, who has led MAS for about 10 years. “But in order not to get into this game, I think Singapore is in danger of being left behind. Getting into this game early means we can get 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 earned a reputation as a global hub of wealth. Singapore needs to strengthen its safeguards to counter risks, including illicit flows, Menon said.
The city-state is “interested in developing crypto technology, understanding blockchain, smart contracts, and preparing for a Web 3.0 world,” he said, referring to the third generation of online services.
Singapore isn’t the only place with crypto ambitions. Sites as diverse as Miami, El Salvador, Malta and Zug in Switzerland are also making efforts. This can be a fine line to walk, given that the crypto industry has grown up with few regulations, so many players balk at attempts by government officials to impose safeguards.
Singapore’s approach has drawn crypto firms from Binance Holdings Ltd, which has had a series of run-ins with regulators around the world, to Gemini, a U.S. operator targeting institutional investors, to build a base. Some 170 companies have applied for a MAS license, bringing the total number of companies seeking to operate under its payment services law to around 400, after the law came into force in January 2020.
Since then, only three crypto companies have received the coveted licenses, while two have been rejected. About 30 of them withdrew their applications after speaking with the regulator. Among those approved is the brokerage arm of DBS Group Holdings Ltd, Singapore’s largest bank, which is also a pioneer in setting up a digital token trading platform while offering tokenization services. .
The regulator takes the time to assess applicants to ensure they meet its high standards, Menon said. The MAS has also increased its resources to cope with the high volumes of potential service operators, he said.
“We don’t need 160 of them to settle here. Half of them can do it, but with very high standards I think it’s a better result, ”he said.
Menon said the benefits of having a well-regulated local crypto industry could extend beyond the financial sector as well.
“If and when a crypto-economy takes off in a certain way, we want to be a major player,” he said. “It could help create jobs, create added value, and I think that more than the financial sector, other sectors of the economy will potentially gain from it.”