Crypto players concerned advertising curbs may dent Singapore's crypto hub drive

SOME players in the crypto industry were caught by surprise when the Monetary Authority of Singapore (MAS) issued guidelines against public promotion of digital payment token (DPT) services, noting that this was a departure from the consultative approach the regulator typically takes when it comes to developments in this nascent space.

Several were also concerned that the ban could crimp Singapore's ambitions to be a crypto hub, although most players The Business Times spoke to recognise that the guidelines are consistent with MAS's stance that crypto trading is not suitable for retail investors.

Under these new guidelines, launched with immediate effect on Monday (Jan 17), crypto service providers should not market or advertise DPT services in public areas in Singapore. Such services also should not be marketed through the engagement of third parties like social media influencers. These come after MAS observed some service providers "actively promoting" their services through online and physical advertisements, as well as via physical ATMs in public areas.

Chia Hock Lai, co-chairman of the Blockchain Association, Singapore, said the timing of the announcement was unexpected. "None of our members who are key players operating in this domain, including those who have already secured the DPT licences, were consulted beforehand," he said.

Chia added that the guidelines could affect how the international community perceives Singapore as a "crypto hub".

"This represents a further tightening of policies and regulations around crypto in Singapore and is slightly negative in terms of optics."

Indeed, members of the Association of Cryptocurrency and Blockchain Enterprises and Start-ups (Access) are concerned.

Anson Zeall, chairman of the 400 member-strong Access, said its members "are concerned that it could potentially deter the development and advancement of Singapore as an innovation hub that promotes the development of cutting edge, blockchain technologies".

Access members will be meeting on Jan 24 to discuss the impact of this ban so as to "come to a consensus and move forward".

Zeall pointed out that holders of capital markets services licences are subject to specific advertising restrictions - such as how ads are to present a fair and balanced view of the investment product, and must be approved by senior management - but there aren't such guidelines for DPT licensees and applicants.

Chia feels the ban would not have a large dent on business as "most players do not engage in large scale publicity". But he believes there could have been "more active engagement with the industry" and "joint discovery of better ways to handle the risks".

He suggested classifying cryptos as "specified investment products" (SIPs) - the categorisation used for products such as structured warrants and futures, which are not as widely understood by retail investors. Financial institutions are required to formally assess prospective retail investors' investment knowledge, work experience and education before selling SIPs to them.

Daniel Lee, former head of business and listing at DBS Digital Exchange, also said it was "somewhat surprising" that these new guidelines were launched without industry consultation.

"The industry will have to adapt. This could result in more relying on information shared informally via word of mouth, which also may not be ideal as such information may not be accurate," he said.

Lee pointed out that established players already known to the market would be less affected by the ban than their newer and smaller peers.

Alex Kim, chief executive of digital asset exchange Upbit Singapore, echoed this: "These (new guidelines) can act as an unintended entry barrier to home-grown startups, making their venture even more challenging," he said.

Kim also sought more guidance on what constitutes "promotion of DPT services".

Local industry players have had to move quickly in response to the new regulation.

Crypto exchange Independent Reserve, which was the first DPT service provider licensed by MAS, is re-evaluating its marketing efforts to ensure alignment with the guidelines, its managing director Raks Sondhi said. The company had publicly advertised in Singapore's Central Business District after obtaining its licence.

"As the only regulated crypto exchange in Singapore offering services to all investors, our main focus has always been to build a world-class, regulated and robust crypto exchange that is trustworthy and secure," Sondhi said.

A spokesperson at Luno, another crypto exchange, said the company is reviewing the guidelines and will take any necessary steps "in due course".

"The crypto market is fast evolving, so its long-term success is reliant upon open communications between businesses like ourselves and regulators," the spokesperson said.

"We do our part to ensure consumers can interact safely and securely in the crypto environment and look forward to working with the MAS and the industry more broadly to ensure the guidance in this area promotes a safe environment for consumers without being unduly restrictive to business."

Lena Ng, a financial regulatory partner at Clifford Chance in Singapore, said while there are a number of sophisticated Singaporeans who are media-savvy and well-read on cryptocurrency, these guidelines aim to protect the vast majority who are less knowledgeable and prevent the "normalisation" of crypto as a retail investment.

At the same time, they are not closing off these offerings from retail investors.

"I think the regulators are calibrating their regulations against risks in the market," she said.

The promotion of crypto services by companies and influencers has led to rebuke from authorities - and in some cases, lawsuits - in other jurisdictions.

In the past few days, several countries have also moved to rein in such activities.

In Spain, from Feb 17, influencers and their sponsors must notify authorities in advance of mass crypto advertising campaigns that will reach at least 100,000 people. Crypto advertising activities across the board will be subject to "supervisory action" and non-compliance could result in sanctions of up to 300,000 euros (S$459,000), or double that of the profit obtained or of the equity capital of the infringing company.

Britain said it would bring crypto ads under the scope of existing legislation, in line with standards for other financial promotions such as stocks and shares. This comes after an industry consultation that began in the summer of 2020.

This means crypto companies cannot promote their offerings unless they are authorised by regulators, or the content of the promotion is approved by a firm which is.

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