Singapore goes from crypto hub to crypto restructuring hub

SINGAPORE’S attractiveness as a crypto hub is now turning it into a centre for the restructuring of troubled cryptocurrency platforms, which could mean more work for corporate finance experts and lawyers.

In the last month alone, crypto platforms Zipmex and Vauld have filed for bankruptcy protection here. Both have incorporated companies in Singapore.

Vauld was in the process of applying for a digital payment token licence from the Monetary Authority of Singapore via its Singapore company, Defi Payments. Vauld has obtained a 3-month debt moratorium with a possibility of a 3-month extension by Nov 11.

Zipmex has obtained approval for a 3-month moratorium extension until Dec 2, rather than the 5-month extension it applied for.

This comes after a spate of bankruptcy filings by crypto platforms in the United States, including Celius, Voyager Digital and hedge fund Three Arrows Capital.

The onslaught may be just getting started. Another crypto platform, Hodlnaut, has recently frozen withdrawals. It joins other crypto platforms reeling from the recent implosion of Luna coin and the plunging prices of Bitcoin and Ethereum.

Defi Payments cites the slumps in these cryptocurrencies as reasons for its current financial difficulties.

Other Singapore-based entities might soon be affected by the turmoil, creating more work for restructuring experts and lawyers: from filing court submissions for debt moratoriums to advising companies on potential turnaround plans to handling creditor committees during the proceedings.

The recent debt moratorium extension by Defi Payments involved more than 147,000 creditors, of which at least 2 were represented by Singapore lawyers at the hearing. On top of that, Defi Payment’s own lawyers had made the moratorium application.

Defi Payments has since been ordered by the court to build a framework for a creditors’ committee, as well as for reporting its cash-flow projections, valuations of assets and management accounts. All that means more work for the lawyers and restructuring experts involved with Defi Payments.

Filing for bankruptcy protection in Singapore seems to be a default choice for crypto platforms with their main operations in Asia. One reason for this could be the island republic’s Number 1 ranking in Asia by the World Justice Project Index for adherence to the law.

It could also be Singapore’s Insolvency, Restructuring and Dissolution Act 2018, which came into force on Jul 30, 2020. This piece of legislation grants an applicant an automatic 30-day debt moratorium, with a court hearing scheduled within 30 days to grant further moratoriums on the basis of the company proposing a scheme of arrangement or showing that it is working towards compromise with its creditors.

Even as the whole crypto sector continues to be buffeted by growing risk aversion, it looks like Singapore’s lawyers and restructuring experts will see more business come their way, untangling and turning around various defaulting crypto platforms.