Blockchain tech behind S'pore's nod for crypto firms

Despite volatile market, the tech can make cross-border transactions easier, says Heng

Singapore has handed out in-principle approvals to three more players that deal in digital payment tokens (DPTs), more commonly known as cryptocurrencies, despite plunging prices in that space.

It is a sign that Singapore is intent on promoting the use of the blockchain technology that drives cryptocurrencies, while trying to prevent retail investors from getting burnt.

The Monetary Authority of Singapore (MAS) yesterday granted in-principle approvals to global cryptocurrency exchange Crypto.com, digital currency broker Genesis and digital assets solutions firm Sparrow.

With this, 14 licences and in-principle approvals have been granted over the past two years to DPT service providers that include stablecoin players and crypto exchanges as well as traditional financial institutions.

"Crypto assets have more recently been in the spotlight for the wrong reasons," said Deputy Prime Minister Heng Swee Keat, while announcing the approvals in a video recording aired at the inaugural Point Zero Forum held in Zurich, Switzerland. "This, however, does not reflect where the greatest value of blockchain and digital assets lies, much of which is away from the retail glare."

While prices of cryptocurrencies can be highly volatile and unsuitable for retail investors, he said the blockchain technology that cryptocurrencies are based on has potential to improve wholesale cross-border transactions, which are now complicated.

"Today's cross-border settlement typically goes through a few intermediaries and is mostly bound by fixed operating hours of settlement banks and systems.

"There is thus much that we can explore using blockchain technology to improve efficiencies, accessibility and affordability of cross-border transactions," said Mr Heng, who is also Coordinating Minister for Economic Policies.

He said Singapore would work with innovative and responsible players in the space to grow Web 3.0, while seeking to minimise the downsides.

He also said the Government will facilitate live experiments to test the feasibility of decentralised finance and asset tokenisation.

In tokenisation, assets are digitised and converted into tokens to be stored on the blockchain, which is also known as the digital ledger.

The downsides of investing in cryptocurrencies have made headlines in recent weeks, with crypto darling Bitcoin now trading at around US$20,000, down 70 per cent from its high in November.

The rout was sparked by the collapse of TerraUSD and sister token Luna in early May, when many retail investors suffered losses. Mr Heng had warned in end-May that retail investors should steer clear of digital assets such as cryptocurrencies.

Even as it aims to be a crypto hub, Singapore ensures that DPT service providers serving the local or overseas markets are registered and licensed. This has led to big names, including exchanges such as Binance, moving their business to Dubai.

In a statement, Crypto.com's chief executive and co-founder Kris Marszalek said "MAS sets a high regulatory bar that cultivates innovation while protecting consumers, and their in-principle approval of our application reflects the trusted and secure platform we have worked diligently to build". Founded in 2016, the platform is one of the largest in the market.

As at end May, MAS has received a total of 196 applications to provide digital payment token services. Of these, 14 have received in-principle approvals so far.

Mr Heng, who had to physically skip the Zurich forum that discusses the future of financial services due to Covid-19, said in a Facebook post yesterday that he is "feeling much better" though he is yet to fully recover.

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A version of this article appeared in the print edition of The Straits Times on June 23, 2022, with the headline Blockchain tech behind S'pore's nod for crypto firms. Subscribe