In its Monday (Dec 20) report, Nikkei Asia suggests that Singapore “is not so hospitable to crypto after all” as entrepreneurs find it difficult to obtain the license to operate digital payment token services under the new scheme launched by Monetary Authority of Singapore (MAS) earlier this year.
And there is, indeed, some evidence to support that angle.
Out of 176 applicants, a whopping 103 have either been rejected by MAS or have decided to withdraw their pending application. Among them is the world’s largest crypto exchange, Binance, which announced its exit from the licensing process and end to onboarding users in Singapore last week (this followed an order to suspend operations issued by MAS in September).
Thus far, only four companies have been granted licenses to operate digital payment token (DPT) services — DBS Vickers, Australia’s Independent Reserve, local fintech startup FOMO Pay, and cryptocurrency payments provider TripleA.
Meanwhile, Coinhako has only received an “in-principal approval” from MAS, and the company is now working hard to meet MAS’ requirements to receive the Major Payment Institution licence to provide DPT services in Singapore.
At this rate, it may turn out that less than a dozen companies are able to legally operate crypto services in the city-state once the reviews are over.
Is Singapore not committed to crypto? Doesn’t it believe in innovation? Doesn’t it want to support cutting-edge startups and even major, seemingly successful companies like Binance?
Quite the contrary.
Less is more
It takes 20 years to build a reputation, and five minutes to ruin it. If you think about that, you’ll do things differently.
– Warren Buffett
Regulatory bodies exist not only to protect consumers, but also the country’s reputation by ensuring nefarious activities are not permitted within its borders. They’re put in place to win trust both among the citizens as well as foreigners.
On one hand, the role of MAS is to ensure that none of the shady practices that the world of crypto has lately become infamous for are allowed to happen in Singapore. The city already has more than enough problems with scams and millions of dollars being lost to fake policemen and civil servants.
On the other hand, it cannot be seen by anyone as a place where criminal activities radiate from to other countries.
Failure to prevent that at a regulatory stage would not only hurt thousands of consumers (denting public confidence in authorities), but also the country itself — and Singapore has earned its strong international position (despite its diminutive size) thanks to global trust it has painstakingly built over many decades.
Secondly, the ongoing hype about cryptocurrencies has encouraged many to venture into the technology without sufficient experience. They may seek to ride the wave of global demand for digital tokens, coins and NFTs, but not necessarily be able to deliver on their promises.
The national regulatory body cannot put its stamp of approval on these companies either, even if their intentions are good.
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.
– Ravi Menon, Managing Director of MAS
For Singapore to become a global crypto hub that it intends to be, companies that register in the city have to offer quality services that are going to be world-class standard setters, inspiring faith in the technology and its capabilities.
Selectivity in the licensing process is crucial for that goal to be achieved, and that authorities are this scrupulous shows the extent of their commitment to innovation.
Nobody needs hundreds of companies trying — we just need a few really good ones.
This is particularly important as the cryptoverse is suffering from poor reputation due to scams, “rug pull” fraud leaving people robbed of their money, questionable transaction charges, poor customer service even among giants like Coinbase and Binance and so on.
For DeFi services to become mainstream at some point, they have to present success cases that inspire trust. Allowing a free-for-all is counterproductive to that goal, which means that it would actually stall innovation rather than aid it.
The early bird gets the worm
While the world is grappling with finding the best way to approach crypto, Singapore’s leap ahead can produce standards that may end up being universally adopted — once again, elevating the role city-state plays on the global stage.
This is doubly important considering how big the role financial services play in the country’s economy is, contributing to around 16 per cent of its GDP, and supporting it as a manufacturing and trading hub.
Singapore can’t allow itself not to be a first nor a prime mover in finance. It has to be both first to the market and a force that is going to have a say in how the new rules are written.
Otherwise, it would expose itself to foreign competition which — if blockchain technology is successful in the long run — could relegate Singapore to a lower league, threatening its status as a financial hub altogether.
The unpredictable nature of innovation is that it is often so significant and sweeping that recent leaders may soon find themselves at the bottom of the stack (the story of Nokia’s fall from grace in mobile telephony with the advent of the smartphone is one of the most telling examples).
Singapore cannot — and clearly does not — accept that risk. At the same time, through the meticulous licensing process, it wants to ensure that it is not only among the first to embrace crypto, but also the first one to do it successfully.