Will Crypto firms survive Singapore’s regulatory heat?

Sahana Kiran
Source – Unsplash

The crypto industry started out as an entity free from the implications of centralized systems. With time, however, the crypto-verse loomed into an ecosystem that unintentionally invited attention from regulators across the globe. Following the recent widespread adoption of crypto along with the downfall of the market, regulators decided to take a keener look into the crypto sphere. Singapore seemed to have been extensively interested in safeguarding its citizens.

Over the last couple of months, the Monetary Authority of Singapore [MAS] was creating quite a buzz. From limiting the involvement of retail investors to outrightly denying crypto licensing applications, MAS is more brutal than ever. Further elevating its authority, the regulator urged crypto platforms to present data pertaining to their business activity.

As per Bloomberg, the regulator was urging businesses to provide details pertaining to the tokens they entail, top lending & borrowing counterparties along with information about the amount loaned. Details with regard to top staked tokens through DeFi were also requested.

This doesn’t come as a surprise considering the recent downfall of an array of crypto platforms. The regulator has been dealing with a number of troubled crypto businesses like TerraForm Labs, Three Arrows Capital, Vauld, Hodlnaut, Zipmex, and others.

Hagen Rooke, a partner at law firm Reed Smith LLP in Singapore noted how the community saw this coming considering the recent slew of insolvencies. Rooke added,

“It is possible that measures under consideration include requirements for MAS-regulated firms to obtain collateral when lending crypto, to conduct due diligence on their counterparties, and to comply with liquidity and risk-based capital rules – similar to the requirements that financial institutions in traditional capital markets are subject to.”

Are Singapore’s crypto regulations meddling with innovation?

The widespread adoption of crypto has forced governments across the globe to roll out regulations. However, some of them often overregulate the industry further curbing innovation. While most have managed to find that balance, Singapore is yet to do so, the community suggests.

The crypto industry was made for the average Joe. It was established to provide financial freedom to the unbanked. Limiting the use of retail investors directly impacts the ethos of the industry itself. In addition to this, Singapore has given out about 10 permits to crypto platforms to operate in the region. It should be noted that this was out of 200 applicants.

A MAS spokesperson spoke about the same and said,

“Licensees and applicants are expected to notify MAS of any events that materially impede or impair the operations of the entity, including any matter which may affect its solvency or ability to meet its financial, statutory, contractual or other obligations.”

If stringent regulations continue to hit the crypto market, the survival of the industry in Singapore could be more challenging than expected.