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Cryptocurrency firms in Singapore can now find it easier to conduct their business. Regulators in the island-state are willing to help companies with bank accounts and other financial services, reported Bloomberg on Oct.10.
Bridging the Traditional with the Modern
Speaking to local reporters, Monetary Authority of Singapore (MAS) director Ravi Menon stated the watchdog is open to helping cryptocurrency businesses find synergy with banking services in the city. However, the move is aimed at bridging the gap between the two sectors and creating an “understanding,” instead of being a lure for crypto startups across the globe.
Also, Menon noted Singapore has no plans to establish licensing standards for crypto-exchanges, similar to those observed in Japan.
Earlier this year, Japan registered over 12 crypto-exchanges with its Financial Services Agency (FSA), providing strict guidelines and adherence for the businesses to follow. Approved enterprises have found it substantially easier to attain banking services.
Drawing attention to the reluctance of Singaporean banks to provide their services to crypto startups, Menon stated:
“The nature of this business is a bit different, so banks may need to employ other ways in which they can establish bona fide. I hope we can bring minds together on this so that we can get over this hurdle.”
The Three Levels of Crypto
While a governance framework remains absent, cryptocurrency activities are put into three categories by Singapore. The city recognizes “utility tokens” as the first classification, and understands the token type is used in blockchain-based applications for purposes of in-app payments for goods and services. As Menon states, this type requires no regulation.
Moving on, the second tranch consists of digital tokens that display the characteristics of financial security – an asset that yields profits for their investors after a prolonged period. But, Menon highlights token issuers are aware of the regulatory implications they can face if brought under the purview of the Securities and Futures Act, and hence, steer clear away “from that line.”
With regards to the above, the MAS warned eight crypto-exchanges operating within its jurisdiction that should conduct due diligence before listing tokens and shouldn’t facilitate the trading of security tokens or crypto-based futures contracts without necessary approval.
The final group consists of payment cryptocurrencies like Bitcoin, which Menon describes as “highly risky” due to its wild price swings.
Citing a regulatory perspective, Menon says the watchdog is lenient about ICO products as long they don’t resemble security. He added:
“If they are not a security, then we don’t have a problem with it. We’ve seen quite a lot of ICO activity that is not security related.”
When asked about the MAS’ main concerns, Menon stated consumer protection and prevention of money laundering are the most significant features while regulating cryptocurrencies. However, he adds there are some economic areas which the MAS’ will not scrutinize, as there is a “limit” to its regulatory autonomy.
Crypto-Friendly yet Cautious
Singapore has implemented strict rules for startups and businesses, presumably to maintain its sovereignty and mitigate links to money-laundering. Regardless, the city continues to be a hotbed for cryptocurrency activity and has expressed its intent to regulation cryptocurrencies and token issuances.
The rising digital asset and blockchain market equates into thousands of new jobs, technology diversity, and economic growth for Singapore. But, the country is taking cautious steps towards regulations the sector and has singled most of its efforts into creating an optimal environment for ICO startups and crypto-exchanges.
However, companies are increasingly facing the brunt of banks closing their accounts, citing a regulatory “vacuum.” Budding entrepreneurs also find it challenging to start banking, causing several to shift base to countries like Malta and Luxembourg – which readily provide their services to crypto-businesses.
Menon warns several aspects of the crypto industry remain a grey area and “dangerous for investors,” and banks exercising due caution is justified. The organizations’ moves aren’t surprising either; banks around the world have historically steered away from providing services to crypto firms.
Singapore’s banking prominence is an impressive force in the traditional markets. The city commands 4 percent of the daily $4 trillion forex trade market, as well as handling hundreds of billions in security, bonds, and equity trades. Its banking prowess is now seemingly extending into the cryptocurrency market, and such developments may propel the pint-sized nation into a significant cryptocurrency powerhouse.