Asia may be heading for a reordering of sorts in cryptocurrency markets, with Hong Kong moving to legalise retail trading of digital tokens just as Singapore looks to impose fresh restrictions on consumers.
Speaking in an interview with Bloomberg Television, Singapore’s central bank chief Ravi Menon had a clear message for other financial centres looking to draw retail crypto trading away with more relaxed rules: We won’t stand in your way.
“We don’t set ourselves out to compete with other jurisdictions, especially on regulation,” said Menon, the managing director of the Monetary Authority of Singapore. “We have to do what is right for us, what is necessary to contain the risks. And the risks are primarily harm to retail investors.”
Hong Kong, having fallen behind Singapore in crypto in past years, is pivoting toward a friendlier regulatory regime as part of a recently stated goal of becoming a top crypto hub. Japan is taking steps to make it easier to list tokens, partially reversing a conservative stance that was blamed for driving crypto startups away. Australia is becoming a regional home for listings of exchange-traded products linked to digital assets.
Singapore’s evolving vision on the kind of regional digital-asset centre it prefers to be is as much an indication of the perils of letting mom-and-pop investors dabble in volatile virtual coins as an opening for other jurisdictions to gain ground.
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The city-state was buffeted by blowups amid this year’s crypto rout, such as at Three Arrows Capital hedge fund and crypto lender Hodlnaut. An index of top tokens is down 58% so far in 2022, leaving many investors nursing losses.
“I think our latest proposals would be among the strictest in the world with respect to retail access to cryptocurrencies,” Menon said. “And we think that’s necessary.”
He acknowledged that some retail-focused crypto companies might move to other jurisdictions, saying “we wish them good luck.”
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Crucial Decisions
Both Singapore and Hong Kong are hosting financial-technology conferences next week -- events that will feature high-profile crypto executives like Binance’s founder Changpeng Zhao and FTX’s chief executive officer Sam Bankman-Fried. Busan, the coastal South Korean city that aspires to become a digital-asset hub, is wrapping up a three-day conference on Saturday.
Hong Kong and Singapore’s diverging approaches to retail crypto trading leave exchange executives facing some potentially crucial decisions. Coinbase Global Inc. and Crypto.com are among global exchange operators that this year secured Singapore permits. There are now only 16 permit holders out of nearly 200 applicants.
“Singapore is getting a bit uncommercial for crypto exchanges by being over cautious on retail participation,” said Adrian Przelozny, chief executive officer of Sydney-based Independent Reserve. “Any decision to choosing a jurisdiction to do business is guided by two principles -- if it will earn profit for me and do I trust that the rules won’t change in that jurisdiction. It is hard to have confidence to invest if rules keep changing.”
Independent Reserve last year received a Major Payment Institution Licence from the Monetary Authority of Singapore, allowing it to operate as a virtual asset service provider.
Retail Curbs
The MAS on Wednesday unveiled proposals to restrict retail participation in digital assets, including banning small investors from borrowing to fund coin purchases. The consultation paper from the central bank also proposed barring companies from using tokens deposited by retail investors for lending or staking to generate yield.
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The proposed restrictions don’t apply to high-net-worth investors.
Menon said Singapore still wants to be a crypto hub, but one that promotes areas of digital assets with “use cases” and tokenization -- the process of using blockchain technology to securitize various assets.
“We accept that cryptocurrencies have a place in the larger digital ecosystem because they are the tokens native to the blockchain that powers much of this activity,” he said. “They need to have an expression in the formal financial sector.”
