Context

• Singapore’s burgeoning cryptocurrency sector has been shaken by the recent collapse of Three Arrows Capital (3AC), a cryptocurrency hedge fund.

How important is Singapore to Asia’s crypto sector?

• Investment in Singapore’s crypto and blockchain companies surged to $1.48 billion in 2021, according to KPMG, ten times the previous year and nearly half the Asia Pacific total for 2021.

  

• 6% of the world’s crypto funds are based in Singapore, ranking it a joint third globally – along with Switzerland and Hong Kong – behind the US and UK.
• Singapore, one of Asia’s main investment banking and asset management centres alongside Hong Kong, is keen to establish a leading role in financial technology, including blockchain and crypto.

Why has Singapore attracted crypto business?

• The scale and range of Singapore’s crypto companies and service providers attracted digital asset companies fleeing regulatory crackdowns elsewhere.
• These include Huobi, a crypto exchange initially focused on China that now has a major presence in Singapore.
• US firms like crypto exchange Gemini have set up regional Asia headquarters in Singapore.

Why did Three Arrows Capital (3AC) collapse?

• Digital currencies have been on the backfoot for months, with Bitcoin losing roughly half its value since the start of May.
• The sell-off was triggered by the collapse of stablecoin TerraUSD and its paired token Luna, resulting in large losses for holders such as 3AC.

What is Singapore’s regulatory stance?

• The Monetary Authority of Singapore’s statements have indicated a welcoming approach, encouraging crypto-related services.
• At the same time, some companies say the authorities’ soothing rhetoric belies an occasionally harsh regulatory stance.
• Only a handful of approvals have been granted so far among well over 100 applicants for new crypto payments licences.
• There were currently well over 200 crypto businesses in Singapore, but several had shut down or moved out after the licencing regime came in.
• The most high-profile of these is Binance, the world’s largest crypto exchange, which left Singapore last year as it came under close scrutiny around the world.

Reference: IE

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