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Singapore not rushing to regulate cryptocurrencies: MAS
THE Monetary Authority of Singapore (MAS) on Wednesday reiterated that Singapore would be slow to regulate cryptocurrencies - a move that industry players said could actually be good for the growth of the cryptocurrency and blockchain sector here, and for making Singapore the region's cryptocurrency hub.
MAS managing director Ravi Menon said: "As of now, I see no basis for wanting to regulate cryptocurrencies." Even so, MAS will remain alert to money laundering and other potential risks stemming from their use, he told Bloomberg in an interview.
Mr Menon added that the central bank's focus is to "look at the activities surrounding the cryptocurrency and asking ourselves what kinds of risks they pose, which risks would require a regulatory response, and then proceed from there".
This stance is unchanged from three years ago, when MAS declared that it would regulate virtual currency intermediaries in Singapore to address potential money laundering and terrorist financing risks. In that announcement made in March 2014, MAS said that it would not regulate virtual currencies per se, as these were not considered as securities or legal tender.
Industry players were quick to point out that MAS' stance was not new, but that Mr Menon mentioned initial coin offerings (ICOs) - a currently unregulated means of crowdfunding that allows companies to issue their own digital tokens that can be bought by investors using cryptocurrencies - marked a good step forward for the industry.
Anson Zeall, chairman of Access, an association representing companies involved in blockchain and cryptocurrencies in Singapore, told The Business Times: "ICOs were mentioned - this is very positive. It was also mentioned that ICOs would be studied on a case-by-case basis to determine if they should be regulated, which is an enlightened move."
Mr Menon had told Bloomberg that if ICOs include the promise of a dividend or other economic benefits, they can resemble regular securities offerings and would be covered by Singapore's Securities and Futures Act. He also noted the existence of other ICO business models that "avoid these security-like features in their digital tokens".
He said: "So we just have to look at them case by case to see which ones we will need to bring into the regulatory ambit, and which ones can stay outside."
MAS's attitude is unlike that of China, which in September dramatically imposed a ban on all ICOs, declaring them illegal and calling an immediate halt to all fund-raising activities. Less than a month later, South Korea followed suit, banning fund raising through all forms of ICOs.
An operator of a cryptocurrency crowdfunding platform told BT: "China went quite extreme. While Singapore is sitting on the fence as usual, there is really little benefit for us to be one of the first to stick our necks out. Even the US hasn't clarified its position. If Singapore can play this right - having seen how it plays out globally - we can become the leading fund raising capital in Asia."
On Wednesday, MAS and the Hong Kong Monetary Authority signed an agreement to boost bilateral cooperation on financial technology matters, which would include blockchain and cryptocurrencies. Both parties will work on a strategic project on cross-border trade finance infrastructure - based on distributed ledger technology - as their first collaborative initiative.
Altona Widjaja, vice-president of the fintech and innovation group at OCBC, told BT that blockchain is a technology that the bank will continue to explore as it "shows great promise", such as the proof-of-concept for a KYC (Know Your Customer) blockchain that OCBC had completed with two other banks earlier this month.
Mr Widjaja said: "While we welcome the regulation of cryptocurrencies, we also welcome the opportunity to test cross-border blockchain transactions, and we will closely monitor the applications of blockchain."
Blockchain - an incorruptible digital ledger of all economic transactions made in virtual currencies - is the technology that enables the existence of cryptocurrency.
Access' Mr Zeall said: "But while all blockchain developments are great, it's important for blockchain and fintech startups in both cities to get sustainable banking partners to support their innovation efforts."
Last month, at least 10 companies that provide cryptocurrency payment and trading services were reported to have encountered bank account closures in Singapore, rendering many of these "blockchain disruptors" unable to continue their operations here and relocating to the US and Japan.