Even as governments around the world struggle to reign in the relentless pace of innovation in the cryptocurrency space, Singapore is adopting a pragmatic approach – adapt to the nascent asset or risk becoming increasingly irrelevant.
Speaking with Bloomberg ahead of the Singapore Fintech Festival, Managing Director of the Monetary Authority of Singapore Ravi Menon echoed his counterparts Gary Gensler, Chairman of the U.S. Securities and Exchange Commission, and U.S. Federal Reserve Chairman Jerome Powell by noting,
“We think the best approach is not to clamp down or ban these things.”
Last month, and in the wake of the People’s Bank of China declaring that all cryptocurrency transactions were illegal, both Powell and Gensler responded by saying that neither of their federal agencies were looking to ban the nascent asset class.
According to Menon, the Monetary Authority of Singapore or MAS, is putting in place “strong regulation” so firms that meet its requirements and address the plethora of risks in the cryptocurrency space can operate.
The Singapore approach would set it apart from most other jurisdictions which have swung from banning cryptocurrencies outright, like China, to embracing them completely, like El Salvador, which declared bitcoin legal tender.
Although the U.S. has adopted a piecemeal approach to regulating cryptocurrencies, using the threat of enforcement action where federal agencies deemed necessary, such an effort could result in a “chilling effect” on innovation.
Several months ago, U.S.-listed cryptocurrency exchange Coinbase Global abandoned plans to launch its “Lend” product, which would pay out interest on cryptocurrency deposits, after the U.S. SEC threatened litigation should it proceed to do so.
A lack of clear regulation has the potential to stymie innovation in the cryptocurrency sector as stakeholders are unsure of whether their developments would raise the ire of regulators and attract enforcement action.
The Singapore view though is that by setting clear regulations and guidelines, cryptocurrency firms and innovators will have the certainty when their products or services encroach on existing laws.
According to Menon,
“With crypto-based activities, it is basically an investment in a prospective future, the shape of which is not clear at this point.”
“But not to get into this game, I think risks Singapore being left behind. Getting early into that game means we can have a head start, and better understand its potential benefits as well as its risks.”
Singapore has a strong global reputation as a wealth hub, and as demand for cryptocurrency services and investments has grown, so has the number of crypto-native companies which have landed and established themselves on the island nation.
From Binance to Gemini, the number of major cryptocurrency companies setting up shop in Singapore has grown exponentially, many of which are applying for licenses under the country’s prescient Payment Services Act that came into force last January.
Menon notes that licenses under the Payment Services Act aren’t just being handed out willy-nilly,
“We don’t need 160 of them to set up shop here. Half of them can do so, but with very high standards, that I think is a better outcome.”