Asia-Pacific’s crypto hub Singapore is expecting more bailouts like Three Arrows Capital (3AC) and bracing for possible risks in the future.
Crypto players in the market expect Singapore to become less accommodating of crypto companies for the foreseeable future.
Ashurst’s senior technology lawyer Hoi Tak Leung referred to the 3AC collapse and told Reuters:
“After recent events it appears likely that the MAS [Monetary Authority of Singapore] will get tougher on crypto and digital assets,”
So far, MAS has favored attracting Crypto companies from around the region, especially from China and India.
Singapore’s previous crypto attitude
Singapore has been publicly pro-crypto for years. The country set the goal to become the crypto hub of the region and succeeded at its aim. A report from the end of 2021 states:
“Singapore has taken the top spot thanks to a booming crypto economy, positive legislation, and the world’s second highest percentage of crypto-owning population. That’s not to mention the clear government strategy and firm regulations that have been providing reassurance to crypto-shy investors.”
Investments in crypto companies of Singapore spiked to reach $1.48 billion in 2021, which was ten times more than the accumulation of half the region in the same year.
According to Gemini’s 2022 Global Crypto Index, Singapore is one of the countries with the highest adoption. More than 30% of the country holds crypto, with two out of five female investors. Over 42% of Singaporean investors invest in crypto as an inflation-hedging method.
Singapore has been experimenting with the Central Bank Digital Currencies (CBDC) since 2021, which is way earlier than most EU nations and the US. The country even extended a friendly hand to China to collaborate with China in developing its digital yuan.
Singapore’s biggest banks have also been working to increase nationwide adoption. The country recently launched a digital asset program to examine the potential of DeFi projects. Singapore has never banned or reprimanded anyone, except for giving a hard time to exchanges with licensing and sanctioning Russia due to its conflict with Ukraine.
Changing crypto sentiment
All the inclusive attitude of Singapore is changing during the current bear market.
Upon Singapore-based 3AC’s bankruptcy, the MAS publicly reprimanded the Capital for mismanaging its assets. While the public shaming didn’t have any legal implications on 3AC, MAS launched a detailed investigation to reveal the reasons for the bankruptcy.
Singapore signaled the change in its attitude for the first time in June 2022, when MAS’s Chief Fintech Officer Sopnendu Mohanty said they haven’t been friendly towards crypto companies recently. He said:
“We have no tolerance for any market bad behaviour. If somebody has done a bad thing, we are brutal and unrelentingly hard We have been called out by many cryptocurrencies for not being friendly.”
A month later, on July 5, the country went one step further and said it was considering applying new regulations to protect the investors from similar crashes to 3AC. Singapore also added the need for global crypto regulation, hinting that they agree with the US Treasury’s recent call. The scope of this new regulation has not been disclosed.