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Hong Kong and Dubai are expected to be the main beneficiaries of a crackdown in Singapore on crypto exchanges, with unlicensed players being forced to close or move their operations by the end of the month.
The Monetary Authority of Singapore caught the crypto industry off guard in May, when it announced exchanges serving only overseas customers would have to close by June 30, unless they received a licence that is hard to attain.
Market observers saw the short timeframe for registering as the financial regulator’s way of flushing out unwanted players in an industry that has already caused embarrassment to the city state.
“Singapore took a reputational hit during the crypto winter,” said Yuankai Lin, a partner at law firm RPC, alluding to the failure of a handful of crypto ventures. “Lots of questions were asked about MAS and whether they could have done anything to prevent the collapses.”
He added he expected the affected exchanges to relocate to regulatory jurisdictions that were more welcoming to cryptocurrencies, such as Hong Kong and Dubai.
Bitget and Bybit, two of the largest global cryptocurrency exchanges with operations in Singapore, are already planning to respond to the new MAS rules by relocating staff to Hong Kong and Dubai, Bloomberg has reported. Bitget declined to comment to the Financial Times, while Bybit did not respond to a request for comment.
The latest move by MAS is not expected to affect the majority of crypto players in the market, but it has caused many companies to reassess their position, according to lawyers.
MAS has explained why the new rules affect crypto exchanges that only serve customers outside Singapore, saying they were harder to oversee.
“The money laundering risks are higher in such business models, and if their substantive regulated activity is outside of Singapore, MAS is unable to effectively supervise such persons,” the regulator said.
It added that the bar for granting licences to such businesses was very high and the regulator’s general approach was not to issue them.
“MAS is cleaning up shop in Singapore and plugging the gaps in its framework,” said Hagen Rooke, a partner at law firm Gibson, Dunn & Crutcher.
“It is de facto shutting down the industry that was operating on the fringes of the existing framework.”
Singapore has long touted its stability as a global financial hub, but the high-profile collapses of several crypto businesses three years ago tarnished its reputation.
Terraform Labs, the company behind the $40bn collapse of TerraUSD digital tokens in 2022, was registered in Singapore, and founder Do Kwon claimed to have visited the city state during an international manhunt to track him down.
Singapore later jailed the co-founder Su Zhu of crypto hedge fund Three Arrows Capital for failing to co-operate with investigations into its failure. The business had begun as a registered fund management company in Singapore before filing for bankruptcy in the US.
Hong Kong and Singapore have competed for the financial industry’s business in recent years. Last year, Hong Kong began offering tax breaks on cryptocurrency assets as part of its efforts to strengthen its position as a leading offshore financial hub.
“One side, Hong Kong, will be thinking about trading, while the other side, Singapore, will be thinking about investment and protecting the wealth,” said Melvin Deng, chief executive of QCP, a Singapore-based crypto company. “They are playing to their strengths”
Dubai and its neighbour Abu Dhabi have been welcoming digital asset companies in recent years as they look to become global centres for the crypto industry.
“Crypto businesses have a history of playing regulatory pinball — a bit of jurisdiction shopping in order to slip between the cracks of different regimes,” said Chengyi Ong, head of Apac public policy at blockchain data company Chainalysis.
“You see a lot of [companies announcing moves to] Hong Kong, Dubai, the UAE — and the US is also signalling that it is taking a more pro-crypto stance,” she added.
“But in most of these cases, if it is just a corporate shell moving there, then you might not see that much impact in terms of capital.”
