Breaking down the varied crypto regulatory regimes in China and Singapore
2021 has been a significant year for the crypto sector, especially as it pushes itself into the mainstream. As of yet, the legal status of cryptocurrency differs from country to country. In some parts of the world, its status is legally defined, such as in Ukraine, Canada and Indonesia; while in other parts, regulations and crackdowns are tightening, such as in China and Singapore.
Governments’ increasing regulations—be it friendly or hostile—on crypto-based activities are no doubt a bane for crypto exchanges and payment companies. While it’s true that many countries are tightening regulations around crypto trading, they are doing it for different reasons and incentives. Let’s take a look at why Singapore and China are racing to impose stricter crypto regulations.
China’s war with crypto continues
China has waged war against cryptocurrency for a host of reasons. In September, China’s central bank declared all cryptocurrency transactions illegal. The bank said in a statement that crypto-related activities are “seriously endanger[ing] the safety of people’s assets.” This week, the National Development and Reform Commission said at a press conference that the nation is considering punitive measures, such as higher power prices, on companies that continue with crypto mining despite the ban.
China’s war with crypto has been going on for a very long time. In June 2019, China officially banned crypto trading and creation when the People’s Bank of China stated that it would block all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites. Despite the 2019 ban, crypto trading continued in China through foreign exchanges. Later in September 2021, the People’s Bank of China (PBOC) blocked overseas exchanges from providing their services to investors.
More than one agenda is at play behind the strict stance of China against cryptocurrency.
China has been pushing for its digital currency, the electronic Chinese yuan, and the government is set to launch it nationally at the 2022 Winter Olympics. Hence, the crypto crackdown by Chinese regulators could be a move to push the adoption of its digital currency. Also, other factors like instability and volatility might make Chinese users opt-out of cryptocurrency usage. Decentralized in nature, cryptocurrencies cannot be controlled by any central authority.
Singapore on its way to becoming the new crypto hub in Southeast Asia
While cryptocurrencies face a tough time in China, Singapore is tapping into the huge opportunity by positioning itself as the “new crypto hub” in Southeast Asia. The MAS’s clear regulatory measures and licensing process could position Singapore as a crypto-friendly nation.
In comparison to China, Singapore has a more progressive approach when it comes to regulating cryptocurrencies. It is also one reason why many China-based crypto companies are applying for a license to set up their operations in Singapore.
According to Ravi Menon, managing director of MAS, having a well-regulated local crypto industry doesn’t just benefit the financial sector. “If and when a crypto economy takes off in a way, we want to be one of the leading players. It could help create jobs, create value-add, and I think more than the financial sector, the other sectors of the economy will potentially gain,” he said in a Bloomberg interview.
In January 2020, Singapore introduced a “Payment Services Act” under which crypto companies could apply for operating licenses. The act controls traditional fiat as well as crypto payments and exchanges. The country has made it easier for foreign crypto exchanges to establish offices with fewer restrictions with this act. Many crypto giants, such as Gemini, Coinbase and Crypto.com, have all applied for operating licenses in Singapore.
Singapore clamping down on Binance
Even though Singapore is in the race to become the global crypto hub, the government is still cautiously approaching crypto players. Binance is a recent example of the government’s guarded stance on cryptocurrencies. Recently, the world’s largest cryptocurrency exchange platform, Binance, faced the heat in Singapore because of pressure from regulators. In September this year, Binance announced that Singapore users of its main platform, Binance.com, could no longer buy and trade cryptocurrencies in compliance with local regulations. The platform advised its users to cease all related trades, withdraw fiat assets and redeem tokens by October 26 to avoid potential trading disputes.
The announcement came after a warning by the Monetary Authority of Singapore (MAS). The MAS warned Binance that its global platform might be breaching the law by providing payment services to Singapore residents without an appropriate license. The MAS has placed Binance.com on its investor alert list, which warns consumers about unregulated platforms that have been wrongly perceived as being licensed or regulated by the central bank.
Price crash & market volatility
The regulatory hurdles in the crypto space have impacted cryptocurrency prices and market volatility for investors. Following the ban by China’s central bank on crypto trading and mining, on September 24, 2021, Bitcoin prices fell as much as 8.9 percent to about US$40,700, while Ether lost nearly 13 percent. However, price turbulence in the crypto market due to any regulatory ban is not a fixed event. On previous crypto bans, Bitcoin prices have also climbed up.
Header image courtesy of Unsplash
