Singapore will be "brutal and unrelentingly hard" on bad behaviour in the crypto industry, according to its fintech policy chief, marking a stark shift in rhetoric after years of the city state courting the sector.
Mr Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore (MAS), the country's central bank, questioned the value of private cryptocurrencies and said he expected a state-backed alternative to be launched within three years.
"We have been called out by many cryptocurrencies for not being friendly," he told the Financial Times in an interview. "My response has been: Friendly for what? Friendly for a real economy or friendly for some unreal economy?"
Mr Mohanty added: "We have no tolerance for any market bad behaviour. If somebody has done a bad thing, we are brutal and unrelentingly hard."
The crypto meltdown has hardened the stance of officials in Singapore, where many crypto businesses had been set up because of the perceived friendly regulatory environment and low taxes.
But crypto exchanges, including Bybit and Binance, have shunned Singapore in recent months as MAS started rolling out increasingly restrictive rules.
Mr Mohanty was speaking as South Korean prosecutors narrowed in on Singapore-based Terraform Labs, the company behind the collapsed stablecoin TerraUSD and its twin token Luna.
In the aftermath of Luna's US$40 billion (S$55.6 billion) wipeout, crypto hedge fund Three Arrows Capital, headquartered in Singapore, was also plunged into a crisis after failing to meet margin calls.
"I think the world at large is lost... in private currency, which is causing all this market turmoil," said Mr Mohanty.
He said Singapore has enforced a "painfully slow" and "extremely draconian due diligence process" for licensing crypto businesses.
Singapore has approved few applications for a licence to operate a crypto business.
Crypto.com, a cryptocurrency trading platform, on Wednesday received in-principle approval to operate. Crypto.com has also received a licence in Dubai and plans to launch a cryptocurrency exchange service there.
But Mr Mohanty's comments suggested that some crypto businesses may face an uncertain future in Singapore.
This week, MAS co-launched a "centre of excellence" in the city state to work on the development of a central bank digital currency, a concept that several countries are exploring to potentially wrest control of online payments from crypto businesses.
Led by software developer Mojaloop and backed by Singapore's investment company Temasek, the group hopes to implement the digital currency in a system that enables low-cost international payments.
Mr Mohanty said his "best bet" was that a digital currency would be integrated into the platform within "a few years", adding that it would not be exclusive to Singapore and would be available to other central banks.
"We are relentlessly focused on the infrastructure of the future economy, which can be based on a digital asset," he said.