How market slump may help Singapore’s retail crypto stance

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Singapore’s gov­ern­ment hasn’t been shy with its views on cryp­tocur­ren­cy trad­ing, stat­ing such mar­kets are too risky for indi­vid­ual investors, which by impli­ca­tion leaves the door open for pro­fes­sion­als at invest­ment banks and elsewhere. 

The plunge in cryp­tocur­ren­cy prices this year — Bit­coin has fall­en about 55% and trad­ed at US$21,555 Fri­day morn­ing in Asia — may be help­ing to achieve the government’s goals as retail traders desert Sin­ga­pore exchanges.

“We antic­i­pate the recent draw­downs in the cur­rent bear mar­ket to have espe­cial­ly hit retail investors,” said Hen­ryk Abucewicz Tan, head of ser­vices for high net worth indi­vid­u­als and insti­tu­tions at Coin­hako, one of the few cryp­to exchanges in Sin­ga­pore to win a full license in the city state.

“But insti­tu­tions who may have been sit­ting on the side­lines might see this as an oppor­tune moment to come in to get some expo­sure,” Abucewicz told Forkast, adding that Coin­hako will be offer­ing more sophis­ti­cat­ed prod­ucts and ser­vices for such investors.

Shift­ing sands

Sin­ga­pore has so far grant­ed licens­es and in-prin­ci­ple approvals to 14 dig­i­tal pay­ment token (DPT) ser­vice providers, includ­ing sta­ble­coin projects, cryp­to exchanges, and tra­di­tion­al finan­cial institutions. 

See relat­ed arti­cle: Sin­ga­pore wants to bring some adult super­vi­sion to crypto

There are still anoth­er 100 wait­ing for their licens­es, with many run­ning under a so-called “exemp­tion” from the Mon­e­tary Author­i­ty of Sin­ga­pore (MAS), the cen­tral bank, which allows them to oper­ate until the appli­ca­tion is approved, reject­ed, or with­drawn by the applicant.

MAS2 1
The Mon­e­tary Author­i­ty of Sin­ga­pore build­ing. Image cred­it: sygna.io

Hong Qi Yu, the chief exec­u­tive offi­cer and founder of Tok­enize Xchange, a cryp­tocur­ren­cy exchange oper­at­ing in Sin­ga­pore under an exemp­tion, said the com­pa­ny has seen increas­es in both retail and insti­tu­tion­al investors in the past cou­ple of years, but the strat­e­gy is now shifting. 

Tok­enize has dou­bled the num­ber of insti­tu­tion­al users in the first quar­ter of 2022, and aims to increase the per­cent­age to 50% of its total users in the next 18 months, Hong said. Last year, out of a total 200,000 users, 80% were retail. 

“This year our focus will be to empow­er and con­tin­ue to engage our exist­ing users, not so much focus on acquir­ing new ones,” Hong told Forkast in an interview.

Hong said the high­er num­ber of insti­tu­tion­al investors is part­ly attrib­uted to the growth of fam­i­ly offices and finan­cial insti­tu­tions in the island nation. 

Crack­ing the whip

Sin­ga­pore is con­sis­tent with its mes­sage of cryp­to as a high-risk asset and the author­i­ties ear­li­er this year restrict­ed adver­tis­ing and pro­mo­tion of the indus­try and blocked cryp­to ATM ser­vices.

The mes­sage only got more insis­tent after the multi­bil­lion-dol­lar col­lapse of the Ter­raUSD sta­ble­coin and LUNA cryp­tocur­ren­cy in May, an event that caused mas­sive loss­es glob­al­ly, includ­ing for retail traders.

The Sin­ga­pore big guns were wheeled out ear­li­er this month as Deputy Prime Min­is­ter Heng Swee Keat called the asset class “a high­ly risky area” and warned retail investors to steer clear.

Next up was Sop­nen­du Mohan­ty, chief fin­tech offi­cer of MAS, who told the Finan­cial Times in an inter­view this week that Sin­ga­pore will be “bru­tal and unre­lent­ing­ly hard” on any illic­it behav­ior in the cryp­to industry.

gardens by the bay in singapore
Gar­dens By The Bay in Sin­ga­pore. Image: Enva­to Elements

Forkast emailed MAS with requests for com­ment in this sto­ry, but had not received a reply as of publication.

A Guardian

In tan­dem with crack­ing the whip, Sin­ga­pore is also tak­ing clear steps to explore the oppor­tu­ni­ties in the blockchain tech­nol­o­gy that under­lies dig­i­tal assets such as cryptocurrencies.

See relat­ed arti­cle: Sin­ga­pore warms up to cryp­to indus­try — on its own terms

When Heng spoke at the Asia Tech X Sin­ga­pore Sum­mit on May 31 — the same venue where he warned about the risks involved in cryp­to trad­ing — he also talked of WEB 3.0 and what he called “poten­tial­ly trans­for­ma­tive under­ly­ing technologies.”

He point­ed out the poten­tial ben­e­fits of dig­i­tal tok­eniza­tion that allows the frac­tion­al­iza­tion of assets, such as real estate, which could offer bet­ter price dis­cov­ery and access to typ­i­cal­ly illiq­uid assets. 

“We rec­og­nize this is a high­ly risky area, but it also has the poten­tial to trans­form the future of finance,” he said. “We must con­tin­ue to adapt our rules to ensure that reg­u­la­tion remains facil­i­ta­tive of inno­va­tion, and yet address­es the key risks that cryp­to assets pose.” 

In line with that, MAS has kicked off an ini­tia­tive called Project Guardian with major finan­cial insti­tu­tions to test asset tok­eniza­tion and decen­tral­ized finance (DeFi) while man­ag­ing risks.

Over­all, the cur­rent tur­moil in the indus­try is “grow­ing pains,” Hen­ry Chong, chief exec­u­tive offi­cer of Malaysia and Hong Kong-based dig­i­tal secu­ri­ties exchange Fusang, told Forkast in an inter­view. “And in every cri­sis lies an oppor­tu­ni­ty,” he said.

See relat­ed arti­cle: Caught between a rock and a hard place, Sin­ga­pore tight­ens cryp­to oversight

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