Singapore’s cryptocurrency goals are impacted by the FTX collapse

• Initially perceived that Singapore would lead in bitcoin hub.
• The government had expressed interest in utilising blockchain technology.
• Cryptocurrency traders might suffer loss.

There was a period when it appeared like Singapore might emerge as a leading bitcoin hub.

Early on, the government had expressed interest in utilising blockchain technology. This, together with the city state’s advantageous economic climate, attracted enterprises that deal in digital assets and a growing investor community.

According to KPMG, industry investment in Singapore grew tenfold in 2021 compared to the prior year to $1.48 billion (£1.2 billion), accounting for nearly half of the Asia Pacific total for the year.

2022 was drastically different from 2021.

Many corporations and crypto assets with ties to Singapore have crashed, setting off ripple effects and resulting in losses across the globe.

First, a well-liked coin called Terra Luna crashed, sending its more stable sister token TerraUSD down.

A few months later, the Singapore-based cryptocurrency hedge fund Three Arrows declared bankruptcy, shuttering Voyager Digital along with it. In August, cryptocurrency lender Hodlnaut became the latest victim in a long line of tragedies.

It’s estimated that this year’s closures of significant market participants destroyed $1.5 trillion in market capitalization for cryptocurrencies.

Then, in November, the US cryptocurrency exchange FTX spectacularly crashed due to a debilitating liquidity shortage, causing billions to be lost in a matter of days. Sam Bankman-Fried, the founder of FTX, has now been accused by US authorities of committing “one of the worst financial frauds in US history.”

The FTX crash was especially upsetting for Singapore. Temasek, the country’s public investment fund, put $275 million into the exchange over a period of time.

Temasek said it will write off the money and is looking into the investment internally.

The fund has a value of about $295 billion, therefore the investment in FTX only accounts for a minor portion of its public wealth holdings.

The loss, according to Singapore’s deputy prime minister and finance minister, hurt Singapore’s prestige.

“This is not mitigated by the fact that Sequoia Capital and BlackRock, two of the top worldwide institutional investors, also invested in FTX,” stated Lawrence Wong.

A lot of people think the Singaporean government could have done more because tail investors were also harmed.

Nicole Yap, 26, claims that because so many significant corporations were supporting the exchange, she didn’t hesitate to invest in it. Although she has lost almost $150,000 (£122,000), she believes that the user should not bear the full responsibility.

“These companies are good, we have seen their records,” the Securities and Exchange Commission (SEC) or the government must certify through regulation. Says Ms. Yap.

“Cryptocurrency isn’t always a scam just because there are many scams out there. However, users lack a platform to learn about these things. Influencers are limited to social media and cryptocurrencies.”

Singapore:
– clamped down on crypto ads
– banned binance .com
– taxing NFTs
– put a top DeFi fund on MAS “Investor Alert List”

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Not as crypto-friendly as I thought when I moved here a year ago.

— Alex Svanevik 🐧 (@ASvanevik) March 20, 2022

During the pandemic, Carol Lim began making cryptocurrency investments. The 52-year-old wanted to be financially secure enough to retire in the following few years.

“Hodlenaut received support from the Monetary Authority of Singapore (MAS), which is why I invested with them. I actually lost roughly $55,000 in today’s money. All I can do is pray that I get some of it back.”

Hodlenaut was one of a select group of businesses that received in-principle clearance from Singapore’s central bank to offer digital payment services. When the lender was required to halt withdrawals due to market circumstances, the licence approval was revoked.

“The fundamental issue is that regulators don’t always understand one another. They want to entice enterprises to their area, but you have to govern in a way that protects consumers “says Chainalysis CEO and co-founder Michael Gronager. Chainalysis specialises in blockchain analysis.

According to Mr. Gronager, regulators must choose between enforcing regulations on the corporation (such as issuing them a licence to operate in the nation) and limiting trading access to ordinary investors because customers are now so globally distributed.

In Singapore, FTX lacked an operating permit. However, according to MAS, it is impossible to stop local consumers from using foreign service providers.

“We should expect to see fraud and quick money in the sector. We observe it in traditional industries of all kinds, as well as on the internet “Says Mr. Gronager.

Even before the FTX scandal, Singapore had begun to implement new regulations, cautioning that the technology may be erratic and speculative. It has been looking into many sites operating in the island nation and earlier this year banned cryptocurrency advertising.

The biggest cryptocurrency exchange in the world, Binance, left Singapore last year after being listed on an investor alert list for soliciting clients without the necessary authorization and offering Singapore dollar trading.

As a result, the crackdown has drawn condemnation from key figures in the sector, such as Brian Armstrong, co-founder and CEO of US-based cryptocurrency trading platform Coinbase.

At the Singapore FinTech Festival in November, he remarked, “Singapore wants to be a hub for Web3 (a vision of the future of the internet that includes blockchains and cryptocurrencies), but at the same time says, “Oh, we’re not actually going to enable retail trade or self-hosted wallets to be available.”

In his perspective, “those two things are incompatible,” he continued.

With an emphasis on the commercial and administrative applications of blockchain technology, Singapore’s government claims it is still enthused about cryptocurrencies and continues to strive to establish itself as a hub for virtual assets.

It has promised to reduce risks by suggesting that retail investors take knowledge tests before being permitted to trade, and it has admitted that this could mean that companies that focus on the retail market may relocate to other jurisdictions.

“Platforms for cryptocurrencies may fail as a result of fraud, unviable business strategies, or excessive risk-taking. FTX is neither the first nor the last bitcoin platform to fail, “explained Mr. Wong.

“Cryptocurrency traders must be ready for their investments to lose all of their value. Regulations alone cannot eliminate this risk.”

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