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Singapore's ascent as an Asian bitcoin hub and subsequent decline

Image: Reuters Berita 24 English -  The recent failure of cryptocurrency hedge fund Three Arrows Capital and indications of stricter regulat...


Image: Reuters

Berita 24 English -  The recent failure of cryptocurrency hedge fund Three Arrows Capital and indications of stricter regulation by the Monetary Authority of Singapore have rocked Singapore's fledgling cryptocurrency industry.

The following are important details about Singapore's emergence as an Asian hub for cryptocurrencies and the effects of the Three Arrows crash.

WHAT ROLE DOES SINGAPORE PLAY IN ASIAN CRYPTO SECTOR?

According to KPMG, investment in Singapore's blockchain and cryptocurrency startups increased tenfold in 2021 to $1.48 billion, accounting for roughly half of the region's total investment.

According to PwC, Singapore is home to 6% of all crypto funds in the globe, placing it third overall after the United States and the United Kingdom, along with Switzerland and Hong Kong.

Singapore, along with Hong Kong, is one of Asia's major centres for investment banking and asset management. Singapore is eager to take the lead in financial technologies, such as blockchain and cryptocurrency.

WHAT IS DRAWING CRYPTO BUSINESS TO SINGAPORE?

Digital asset companies fleding regulatory crackdowns abroad were drawn to Singapore's crypto companies and service providers due to their size and variety.

Among them is Huobi, a cryptocurrency exchange that was formerly mostly focused on China but now has a sizable presence in Singapore.

US companies have established regional Asia offices in Singapore, including cryptocurrency exchange Gemini.

The citystate was also a pioneer in creating a licencing system for cryptocurrency businesses, drawing many businesses thinking that the support of a top regulator would help them succeed.

Other prominent business players have sought for licences in Singapore, including cryptocurrency exchange Coinbase.

The biggest bank in Singapore, DBS, has started its own cryptocurrency exchange.

HOW COLLAPSED 3AC AND WHY?

For months, digital currencies have been in decline, with Bitcoin losing about half of its value since the beginning of May.

The collapse of the stablecoin TerraUSD and its linked token Luna, which caused significant losses for holders like 3AC, precipitated the sell-off. An executive stated to the Wall Street Journal last month that the company lost around $200 million of its investment in Luna and that it was still working to determine its losses.

Several of 3AC's lenders allegedly sent it letters of default, according to documents filed in U.S. courts.

WHAT IS THE REGULATORY STANCE IN SINGAPORE?

According to statements made, the Monetary Authority of Singapore has a welcoming attitude and supports services relating to cryptocurrencies. https://www.mas.gov.sg/news/speeches/2022/mas-approach-to-the-crypto-ecosystem.

However, some businesses claim that the government's reassuring rhetoric masks an occasionally strict regulatory approach.

Out of far over 100 applicants for new crypto payments licences, just a few permits have so far been given.

There are already well over 200 crypto enterprises in Singapore, but several have closed or relocated as a result of the licensure regime, according to Chia Hock Lai, co-chairman of the Blockchain Association Singapore.

The most well-known of these is Binance, the largest cryptocurrency exchange in the world, which fled Singapore last year as it came under intense international investigation.

Like other authorities, MAS has made it clear that it would adopt a strict approach to money laundering, consumer protection, and other potential concerns in the world of digital currencies.

Tharman Shanmugaratnam, Senior Minister and Chairman of the MAS, stated to the legislature last week that the agency was thinking about adding more consumer protections for cryptocurrency trading, but he omitted 3AC.


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