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    Tuesday, August 3, 2021

    Crypto Exchange Gets Singapore Nod on Digital Token Services

    The Monetary Authority of Singapore has granted an “in-principle approval” under the Payment Services Act to cryptocurrency exchange Independent Reserve, allowing it to operate as a regulated provider for Digital Payment Token services.

    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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