Crypto groups shelter in Singapore as global regulators crack down

Global cryptocurrency groups are expanding their presence in Singapore, drawn by the city-state’s friendly regulatory environment as other markets crack down on the industry.

Among the executives to move to the Asian financial hub are Changpeng Zhao, founder of Binance, a crypto exchange that processes trillions of dollars in trades per year. Gemini, a US exchange founded by the Winklevoss twins, is also boosting its headcount in Singapore.

The city has yet to issue licences to cryptocurrency companies, but it has granted exemptions to some of the industry’s biggest players, allowing them to serve local retail and institutional investors.

While growth in the crypto industry has been supercharged this year, regulators in markets including the US, UK, and China have clamped down on the sector. Hong Kong, a rival Asian financial centre, is set to limit crypto trading to accredited or institutional investors under a new law.

Singapore has been much more welcoming. Sovereign wealth fund GIC and state-backed investment company Temasek have spent hundreds of millions of dollars investing in the sector. The Monetary Authority of Singapore has made it easier for foreign crypto groups to set up and service residents, albeit with restrictions including limits on transactions. Singapore Exchange has introduced two cryptocurrency indices.

“The crypto bros around the world have read the writing on the wall and realise Singapore Inc is embracing the asset class,” said the founder of one crypto start-up based in the city.

Binance has been granted a licence exemption in Singapore and has advertised more than 200 jobs located in the city on LinkedIn in the past month. Vitalik Buterin, the founder of cryptocurrency Ether, is also based there.

OSL, a Hong Kong-based exchange, has also been granted a licence exemption and plans to double its headcount by the end of the year.

“The number one deciding factor when you think about where to have your operations is regulation. Singapore is clear and precise on how it engages with the cryptocurrency and digital asset markets,” said Kanny Lee, head of OSL’s Singapore office.

Gemini, founded by Cameron and Tyler Winklevoss, chose Singapore as its Asian headquarters and expects to have about 50 employees by the end of 2021, compared with just one when it launched the office in June last year.

“Singapore is a major financial hub of Asia with a good pool of clients, especially in the private wealth space. We have had conversations with wealth management firms as a lot of them require crypto solutions,” said Jeremy Ng, Gemini managing director for Asia.

Jihan Wu, the billionaire co-founder of Chinese crypto mining tech group Bitmain, has launched a crypto start-up in the city. 

The MAS said about 40 per cent of applicants under Singapore’s Payment Services Act wanted to provide digital payment token services but there had been no “significant pick-up” in applications “directly attributed to the actions taken by other countries”.

Chia Hock Lai, chair of the Blockchain Association of Singapore, said there were a number of Hong Kong-based players establishing offices in the city. The Hong Kong legislation that would limit trading to accredited investors “is telling” about its stance on digital currencies, he said.

Singapore’s economy meanwhile is heavily reliant on services such as commodities trading and financial transactions.

“Without a natural resource industry to fall back on Singapore cannot risk being overly hostile to an industry that could be a big winner in attracting talent and business,” said Daniel Burke, a Singapore-based managing director for US cryptocurrency custodian BitGo, adding if Singapore failed to get the framework right it could starve the city of much needed future business.

However, some industry figures said a lack of clarity on when MAS would approve licences was becoming problematic. “We do get a few potential clients saying they won’t deal with us until we have a proper licence,” said one applicant. “Unfortunately, there is no sense of when that will happen yet.”

Additional reporting by Stefania Palma in Singapore