How Singapore is becoming the new Asian capital of digital currencies
At the end of October, one of Southeast Asia's largest banks, BDS Bank of Singapore, accidentally posted information concerning the imminent launch of their cryptocurrency exchange. Despite being deleted, a Twitter user managed to take a screenshot. The exchange would support the Singapore, American and Hong Kong Dollars and the Japanese Yen alongside some of the main cryptocurrencies. The platform would also include tokenization services for securities and assets, and custodian services for cryptocurrencies and tokens. However, the exchange is still under development and awaiting for regulators’ approval. The news confirm not only the interest of Singapore for the digital transformation of finance but also the recognition by traditional banks of the growing potential of cryptocurrencies.
Several industry leaders have already opened their offices in Singapore, such as Binance (a leading trading platform), Wirex (a payments platform) and Coinbase (cryptocurrencies exchange). And 91 new start-ups have been established in the small city-state in 2020, for a total of 234 new entities in this industry. Some of these are involved in projects with Mastercard, Visa, Alibaba, Tencent and Facebook.
In the broader Asia-Pacific, the first countries that adopted the cryptocurrencies were Japan, China and South Korea, despite in some cases either limiting or banding their usage. Singapore opted for a different approach. The Monetary Authority of Singapore (MAS) – the local Central Bank and regulatory authority – has proactively monitored the evolution of these technologies and businesses. It first advised consumers and investors on the risks involved in these kind of investments. In some instances it directly intervened by asking to return the funds to investors of a Singapore based ICO or by sending warnings to cryptocurrencies exchanges that did not properly inform local authorities on their activities.
The purpose of these actions was not aimed at disrupting or prohibiting these new businesses but rather to monitor this new industry in order to develop an adequate regulatory framework. In 2017 a Guide to Digital Token Offerings was issued and in 2019 a more detailed regulation, in effect as of January 2020, the Payment Services Act, was developed. This law regulates digital payment services, including cryptocurrency exchanges in Singapore. As a consequence, entities that operate in the crypto space need to register and obtain a license in order to do business in Singapore.
Having a clear regulatory environment in this new industry will allow Singapore to maintain its current international financial center status as well as take advantage of these new technologies and investment opportunities. In the meantime, many jobs opportunities have already been created.
The government of Singapore is also interested in these new technologies for other reasons. Blockchain technologies are not limited to the financial space. The way information is organized and stored grants a very high degree of security. It allows to create what one could call a “digital authentic”. Its applications are therefore not limited to the monetary, but they can be extended to other fields such as the public administration, register office management and other public services.
MAS has recently announced it shall grant 180 million USD in the next three years to the financial sector. These funds shall be aimed at Fintech and financial digitation projects, including artificial intelligence for financial services. With the National University of Singapore and the National Research Foundation, MAS has also established the Asian Institute of Digital Finance which aims at promoting and coordinating innovation between universities, research institutions and businesses in order to promote projects ranging from Fintech, blockchain, digital financial platforms up to next generation financial services on 5G networks. It’s starting its operations by the end of this year.
It seems that Singapore is setting up the basis to become a hub of technological innovation in the digitization of finance. The idea is to promote public and private synergies to cultivate the digital financial environment of Singapore, and this strategy may very well lead to a successful outcome.
By Luca Annone