The Asian city-state becomes a key battleground in the
digital asset industry’s bid to woo watchdogs in global financial hubs.
The company is the first exchange to be granted formal
permission to operate in Singapore out of about 170 applicants, including
global exchanges Binance and Gemini.
The south-east Asian hub has become a magnet for
cryptocurrency companies and executives as many see it as a friendly regulatory
environment. Global financial regulators are increasingly scrutinising the
fast-growing digital asset industry, trying to balance it against investor
protections and snuffing out the use of cryptocurrencies in money laundering,
the financing of terrorism and fraud.
Some groups in Singapore, including Binance, have already
been given an exemption to provide services to retail and institutional investors
while they await a formal licence. Independent Reserve submitted its
application in April 2020.
“We have been waiting more than a year for this day,” said
one foreign crypto exchange that operates in the city. “Now everyone is
wondering who will get approval next.”
Singapore’s resource-poor economy is heavily reliant on financial
services and its appeal as a business hub has increased as Hong Kong, a
competing Asian financial centre, has been perceived as losing its
attractiveness because of China’s wide-ranging national security law. The
digital asset industry has emerged as another front in the rival cities’
competition.
As in mainland China, Hong Kong has taken a stricter stance
on the freewheeling cryptocurrency industry. The city is set to limit crypto
trading to accredited or institutional investors under a new law.
Singapore, meanwhile, has made it easier for foreign crypto
groups to establish offices and serve residents and businesses, albeit with
restrictions including limits on transaction volumes. It introduced a payments
law in January 2020 under which companies could apply for a licence. About 90
digital asset companies applied and are operating under an exemption.
In Europe, the UK financial regulator has approved a handful
of groups under its crypto regime, which mostly focuses on determining whether
the companies are compliant with anti-money laundering rules. The Financial
Conduct Authority said in June that a “high” number of digital asset companies
were not meeting its standards and that at least 51 had withdrawn their
applications.
Singapore’s approval on Monday evening of Independent
Reserve’s application sent ripples of excitement through the industry in
anticipation of more go-aheads to come.
“All eyes are on Singapore and their regulatory regime,”
said Raks Sondhi, Independent Reserve’s Singapore-based managing director.
The MAS wants to establish the city-state as a global hub
for the blockchain ecosystem and the “long process” to get the licence was due
to the regulator’s focus on ensuring consumer protections and anti-money
laundering measures, he added.
These included implementing the “travel rule”, which
requires crypto companies to share personally identifiable information for
transactions over a certain value. All successful applicants in Singapore need
to implement the rule, per MAS guidance.
Eric Anziani, chief operating officer of Crypto.com, a
digital currency exchange platform that has a large presence in Hong Kong but
is growing quickly in Singapore, said the geopolitical risk in Hong Kong had
escalated. “Singapore is also more favourable to retail investors,” he said. “I
think there are now more opportunities there in terms of talent as well.”
The head of another global exchange in Singapore said the
“China overhang” had made Hong Kong less enticing as a crypto destination,
especially for custodian services. “A lot of our customers were worried Chinese
officials could come across and take their assets sitting in offline vaults.”
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