Orient Magazine Issue 89 - November 2022 | Page 32

THE UK-SINGAPORE CRYPTO MARKET The last two decades have seen an indelible shift from conventional banking services to the use of financial technology (fintech) - an umbrella term for technical innovations in the financial services sector. And even though the global fintech market is coming back down to earth after several years of stratospheric growth, it is still expected to grow significantly in the next few years, reaching a projected $305.7 billion by 2023. The UK and Singapore are both at the vanguard of in- novation in the financial sector. The UK has built on its traditional role at the heart of the global financial sys- tem to emerge as a leading fintech hub, with a thriving ecosystem of around 2,500 fintech companies. Singa- pore, also a historic commercial centre, has similarly adopted an open stance towards innovative financial services, belying its prevailing social conservatism. The two countries have been keen to establish part- nerships to promote their respective fintech indus- tries. In May 2016, the UK Treasury and the Monetary Authority of Singapore (MAS) signed a “FinTech Bridge” agreement, the first of five such agreements made by the UK with Asia Pacific markets to boost the fintech sector. The agreements are designed to overcome barriers to international market entry and support UK-based FinTechs looking to expand interna- tionally by harmonising regulations across the juris- dictions; enabling regulators to refer eligible FinTechs to their counterparts; and by encouraging collabora- tion between key fintech players in the UK and Bridge markets. Cryptocurrency: Enthusiasm or Caution? While the world’s financial centres unanimously rush to embrace fintech, the picture is more nuanced when it comes to cryptocurrency. Attitudes towards cryp- to vary enormously around the world, but the UK and Singapore both have a publicly supportive stance and accommodating regulatory frameworks, albeit with caveats. So, does official promotion of UK-Singapore partnerships and international expansion translate into a rosy picture for crypto firms? The UK government is certainly keen to embrace the potential of the crypto sector. Earlier this year it declared its intention to position the UK as a global cryptoasset hub and announced activities including regulator-led ‘CryptoSprint’ events, public-private consultation on expanding crypto-related regulations and establishing a Cryptoasset Engagement Group to work more closely with industry. The picture in Singapore is more nuanced, although broadly like the UK. The country was an early mover in embracing blockchain and distributed ledger tech- nology, and the regulatory environment is generally perceived as accommodating for crypto. It initially attracted many firms and investors in the crypto space and was home to more than 220 registered firms as of 2021. 33 However, Singapore is now taking a more cautious stance with regulations being strengthened and expanded to cover consumer protection and market conduct. Uncompromising measures to restrict retail access to cryptocurrencies have recently been an- nounced, including a ban on crypto firms marketing their services to the public. Officials are wary of crypto being used as a speculative investment, especially by inexperienced retail customers, and so are trying to develop certain use cases while discouraging others. Over the course of 2022, a (small) number of crypto firms have announced they are leaving Singapore, cit- ing licensing delays and regulatory uncertainty. This includes global crypto giant Binance, which withdrew its licence application and shut down its Singapore trading platform in February, and Bybit which moved its global headquarters from Singapore to Dubai in April. On the other hand, there have also been good news stories this year, such as MAS granting in-prin- ciple approval to global fintech firm Revolut and local crypto platform Luno to offer digital payment token (DPT) services. Regulatory Environments The imminent introduction of new controls in Sin- gapore is likely to delay international crypto firms moving into Singapore in the short term. However, for any UK firms taking a longer-term view, it is worth considering the comparative nature of the regulatory environment. Knowing if licensing requirements and legal provisions are similar to their home market, and how the anti-money laundering and counter-terrorist financing (AML / CTF) regimes compare will be a key part of any business decision. At a basic level, cryptocurrency has a similar official status in both countries - it is legal, regulated, but not considered legal tender. Virtual asset service pro- viders (VASPs) in both countries are regulated by the financial services regulator - the Financial Conduct Authority (FCA) in the UK, and MAS in Singapore, and the process to obtain a licence in both jurisdictions is onerous. Both regulators state that their licensing processes are necessarily stringent for jurisdictions aiming to be responsible global crypto hubs. Conclusion Both the UK and Singapore governments have shown plenty of support for fintech companies, theoretical- ly including crypto firms, expanding from the UK to Singapore or vice versa. The comparable regulatory standards should make any expansion straightforward - at least, no more difficult than for traditional finan- cial service providers, although firms will clearly have to be aware of nuances, such as the precise regulatory requirements for know-your customer programmes. Despite the territory’s early-adopter position, Singa- pore has recently adopted a more cautious approach to the crypto sector. However, it is not unique in tightening up its regulations; the recent crypto market crash has created global resolve to address regulato- ry uncertainty and weak controls. Many in the crypto industry have in fact long been calling for stronger guidance from government regulators, seeing this as a prerequisite for greater stability and legitimacy. So, a stricter regime in Singapore could ultimately be a boon for companies not seeking to play regulatory arbi- trage. However, most firms considering international expansion will likely decide to hold fire for now and see how the regulatory situation pans out into 2023. About Maya Maya Braine is a Managing Director and the Head of Insights and Research at the financial crime consultancy FINTRAIL. She has managed the design and implementation of new anti-financial crime programmes and conducted investigations and training for a wide range of traditional banks, FinTechs, and other financial institutions. She has a background in business intelligence and corporate investigations and has led financial crime review programmes and money laundering and corruption investigations at some of the world’s largest banking groups. About the Company FINTRAIL is a financial crime consultancy with expertise supporting the entire financial industry ecosystem, including FinTechs and the cryptocurrency sector. Its unique team of experts is drawn from the industries it supports and has deep hands-on experience in leadership roles with leading banks, FinTechs, technology vendors, and government agencies. Headquartered in London, it also has an office in Singapore. Find out more at www.fintrail.com. FINTRAIL is an active member of the BritCham Financial & FinTech Committee. The main area of regulatory focus is AML / CTF legisla- tion. Although crypto is often seen as the unregulated “wild west” of financial services, this is not the case in either the UK or Singapore, where firms are subject to robust regulations. Regulated firms must abide by AML / CTF laws, including Know Your Customer (KYC) requirements and obligations to support suspicious activity to the regulator. Both countries have issued specific financial crime regulations for crypto firms, to be adhered to over and above the standard require- ments for regulated firms. THE UK-SINGAPORE CRYPTO MARKET