Singapore pulls ahead of Hong Kong in race to be digital asset hub
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Singapore doled out 13 licences in 2024 to a range of digital asset operators, including top crypto exchanges OKX and Upbit.
PHOTO: ST FILE
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Singapore – Singapore forged ahead with efforts to formulate a digital asset hub in 2024 while rival financial centre Hong Kong has struggled to gain traction.
Singapore doled out 13 licences in 2024 to a range of digital asset operators including top crypto exchanges OKX and Upbit, as well as global heavyweights Anchorage, BitGo and GSR.
That is more than double the licences awarded the previous year. A similar licensing regime in Hong Kong has been slow to progress.
Both cities are bidding to entice digital asset firms to their shores with dedicated regimes, tokenisation projects and regulatory sandboxes. The local authorities see in digital assets the potential to boost the allure of their respective jurisdictions as global business hubs, but progress has been uneven.
“Hong Kong’s regulatory regime for exchanges is more restrictive in a number of ways that matter, such as custody of customer assets and token listing and delisting policies,” said Ms Angela Ang, senior policy adviser at consultancy TRM Labs. “This may have tipped the balance in Singapore’s favour.”
Approvals in Hong Kong have come slower than expected and regulators have signalled their intent to authorise more exchanges by the end of 2024.
The city has fully licensed seven platforms in total, with four of those given the green light – with some restrictions – on Dec 18. A further seven hold provisional permits. Prominent exchanges such as OKX and Bybit withdrew their applications for Hong Kong licences.
Hong Kong allows trading in only the most liquid cryptocurrencies such as Bitcoin and Ether, barring investors from punting on smaller and more volatile tokens, known as altcoins.
“It’s quite a high standard to meet and be profitable,” said Mr Roger Li, co-founder of One Satoshi, a chain of stores in Hong Kong offering over-the-counter conversions between cash and crypto.
Another factor for digital asset executives mulling over expansion in Asia is the influence of China, where crypto trading is banned.
Hong Kong’s special administrative regime has a different risk profile compared with other jurisdictions, said Mr David Rogers, regional chief executive at market maker B2C2, which has applied for a licence in Singapore.
Singapore’s supportive digital asset environment makes it a “safe, long-term choice” for a regional hub, he said. “It is a risk-adjusted approach we’re taking here.”
On the wholesale side, both cities can point to progress getting regulated financial institutions to experiment with blockchain software.
The Monetary Authority of Singapore in November announced plans to support the commercialisation of asset tokenisation
Hong Kong oversaw the sale of HK$6 billion (S$1.05 billion) of digital green bonds using HSBC Holdings’ tokenisation platform.
Hong Kong also notably rolled out spot Bitcoin and Ether exchange-traded funds (ETFs) in April, but they have failed to stoke the kind of enthusiasm displayed by buyers of equivalent products in the US.
The city’s Bitcoin and Ether ETFs combined have amassed about US$500 million (S$679 million), a fraction of the more than US$120 billion held by US issuers.
“Singapore’s framework encourages interaction between new entrants and established institutions,” said Insead’s associate professor of finance Ben Charoenwong.
Hong Kong’s focus on established financial institutions “creates fewer opportunities for new entrants and limits the scope of innovation”. BLOOMBERG
