Singapore, Crypto companies ideal place

Singapore is growing its digital assets industry while reducing risks, and its clear regulations allow firms to better plan for the future, writes Desmond Yong of DTC.

Crypto winter has been harsh for many people an companies. As of June, nearly US$400 billion of value has been wiped from cryptocurrencies as the industry market cap fell below US$1 trillion for the first time since January 2021. The sudden crypto price downward spiral led to many companies freezing clients’ accounts, and major companies like Celsius, Three Arrows Capital and Babel Finance were also severely affected — driving the market into further despair.

But not all is doom and gloom. Post-crypto winter is the time to reflect, rebuild and reframe the conversation around cryptocurrencies from speculation to utility — and there may be no better place for that than Singapore.

Reflections for a better ecosystem

Since Terra’s collapse, countries around the world have sped up their review of crypto regulations. In June, Japan became the first country to regulate stablecoins for investor protection, legally defining stablecoins as digital money where holders have the right to redeem them at face value. Regulators in the U.S. are also pushing for better clarity on cryptocurrency, such as designating an authoritative body to define and regulate them. Better regulations will be key to building confidence and trust in cryptocurrencies.

Singapore is well-positioned to regulate cryptocurrencies for a better ecosystem. The country is working to grow its digital asset capabilities while managing the risks. Singapore now has regulations in place that discourages crypto speculation and bans companies from advertising crypto trading services to the public. Some companies viewed these regulations as too strict, and have opted to relocate to a more “pro-crypto” environment. But others, including Digital Treasures Center, are choosing to stay in Singapore for the government’s pragmatic and responsible approach.

Singapore’s clarity in regulations allows companies to self-evaluate whether Singapore is suitable for them. The government provides support for fintech companies and grants for digital acceleration. Singapore also offers a strong support ecosystem, with three associations — Association of Crypto Currency Enterprises and Start-ups Singapore, Blockchain Association Singapore, and Singapore FinTech Association — that companies could join to improve the industry and provide regular feedback to regulators and government agencies.

Singapore is taking a cautious, responsible and long-term approach that leverages crypto to better society. Singapore regulators are looking to cryptocurrencies and blockchains to provide real economic value, such as improving underlying processes of an existing activity or providing a more efficient solution to an existing problem.

Rebuilding the industry

Currently, many crypto companies are facing serious liquidity crises, job cuts and a hiring freeze. Mergers and acquisitions are taking place across the crypto industry, which is weeding out companies without strong fundamentals or products. For example, Goldman Sachs is looking to buy up distressed assets from cryptocurrency lender Celsius, while cryptocurrency exchange giant FTX is looking to acquire BlockFi. Mergers and acquisitions could also weed out bad actors in the crypto industry and channel capital to better projects.

In rebuilding the crypto industry, some government authorities are rallying stakeholders to utilize different use cases of cryptocurrencies and blockchain to solve real-life problems, such as tokenization and cross-border settlements. Singapore is a prime example of a government that is keen to rebuild the industry and drive crypto development that delivers utility value. In fact, the Monetary Authority of Singapore (MAS) has partnered with private sector blockchain companies in Singapore and beyond to innovate with projects such as:

  • Project Guardian, which explores the economic potential and value-adding use cases of asset tokenization.
  • Project Ubin, which explores the use of blockchain and distributed ledger technology for clearing and settling payments and securities.
  • Project Dunbar, which proved that financial institutions could use central bank digital currency (CBDC) issued by participating central banks to transact directly with each other on a shared platform.
  • Bank of Ghana partnership, which is building a platform to allow decentralized credential verification.

Singapore’s proven track record as a center for capital markets also offers crypto companies that survive the crypto winter better access to liquidity.

Reframing the crypto conversation

It’s prime time to reframe the narrative and goals around crypto from speculative gains to intrinsic value, and Singapore is leading the way with MAS chief fintech officer Sopnendu Mohanty asking how crypto projects are driving value.

Many Singaporean crypto companies are proving that crypto can be used to solve real-life problems. For example, there are Singaporean companies that embrace crypto as an alternative form of payment to help reduce settlement time and foreign transaction fees, and others aiming to solve blockchain platforms’ scalability problem.

The crypto industry is in its nascent stage and holds enormous potential to make a positive impact on society, but stakeholders within the ecosystem have to actively commit toward a shared vision, revisiting the ways that they have previously approached crypto.

With the right regulations and incentives in place, Singapore could guide the 600-plus blockchain companies headquartered in Southeast Asia to leverage their collective strength and develop products to address issues like interoperability, cross-chain compatibility and tokens stability. Singapore is the ideal place to rebuild a responsible crypto industry. The country has a strong foundation of developing a responsible and innovative crypto ecosystem, and in its latest report, MAS is seeking industry feedback to further safeguard consumer interests. It is driving a shared vision of developing the crypto industry as a way to improve society, starting with crypto projects that offer economic value, financial inclusion and utility for the betterment of society.

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