Global crypto hubs: Singapore set to contend with Hong Kong

By Raffaele Redi

Singapore looks eager to compete with Hong Kong to become a world-leading crypto hub

Singapore skyline                                 
Singapore: the city-state could benefit from China’s crypto ban – Photo: Shutterstock
                                

Singapore looks eager to compete with Hong Kong to become a world-leading crypto hub following China’s ban on cryptocurrencies. However, the crypto market still represents only a small proportion of the city-state’s overall economy.

“We think the best approach is not to clamp down or ban these things,” Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), told Bloomberg, referring to digital assets.

Although cryptocurrencies are not legal tender in Singapore, the city-state has taken a friendly position on the issue. However, MAS has also issued several warnings to the public of the risks of investing in cryptocurrency products.

“The crypto assets space is constantly evolving. MAS has been closely monitoring developments and will continue to adapt its rules as needed to ensure that regulation remains effective and commensurate with the risks posed,” Tharman Shanmugaratnam, the senior minister in charge of MAS, said recently in response to a parliamentary question on the crypto assets market.

“Investors, on their part, should exercise extreme caution when trading cryptocurrencies,” he added.

Singapore’s crypto market

The size of the cryptocurrency market in Singapore remains small compared to the traditional market, or shares and bonds. Cryptocurrency funds are also not authorised for sale to retail investors.

According to MAS, the combined peak daily trading volume of three major SGD-quoted cryptocurrencies – bitcoin (BTC), ethereum (ETH) and ripple (XRP) – was 2% of the average daily trading volume of securities on SGX in 2020.

Moreover, cryptocurrency derivatives traded through financial institutions likewise amounted to less than 1% of the derivatives trading activity on SGX, while cryptocurrencies comprised less than 0.01% of the assets in funds managed by MAS-regulated fund managers.

The size of the securities tokens market is also small. Of more than 60 recognised market operators currently regulated by MAS under the Securities and Futures Act (SFA), only three allow the trading of securities tokens, and with very small trading volumes. Recognised market operators are also not allowed to offer their products to retail investors.

In 2020, as the Payment Services Act 2019 (PSA) came to force, MAS has stepped up surveillance of the cryptocurrency sector and businesses, “to identify suspicious networks and higher risk activities for further supervisory scrutiny”.

Further reading: Hong Kong set to be global crypto hub after Chinese ban

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