Singapore’s Central Bank Slams Crypto Trading, Talks Up Digital-Asset Opportunities

Singapore’s top financial regulator said cryptocurrencies are “highly hazardous” to many investors, but made clear the city-state still wants to develop and actively promote a digital-asset ecosystem.

Ravi Menon,

the managing director of the Monetary Authority of Singapore, the country’s central bank, on Monday criticized the trading of cryptocurrencies by individual investors. He said cryptocurrencies lacked the fundamental qualities of money and offered no uses outside a blockchain network—except for speculation.

“Cryptocurrencies have taken (on) a life of their own outside of the distributed ledger, and this is the source of the crypto world’s problems,” he said. He described their only useful function as rewarding those helping to validate and maintain a record of transactions on a blockchain.

Singapore has previously invited crypto trading platforms, brokers and lenders to apply for licenses in the country. But it has recently grappled with how to protect its reputation in the wake of the collapses of multiple crypto players that were based in the city-state.

The latest crash caused a roughly $2 trillion wipeout in the market globally. The implosion of so-called algorithmic stablecoin TerraUSD and firms such as crypto hedge fund Three Arrows Capital has put a spotlight on Singapore. Terraform Labs Pte., the entity behind the stablecoin, was registered in Singapore and Three Arrows Capital was based there for years, although the former wasn’t licensed in the city and Three Arrows wasn’t regulated under the country’s Payment Services Act for digital-asset service providers. Zipmex, a crypto exchange, and Hodlnaut, a crypto lender, are both based in Singapore and ran into financial problems recently.

Mr. Menon acknowledged that the regulator’s messaging—wanting Singapore to become an innovative financial-technology hub while defending the city’s slow and stringent licensing process for crypto firms—has caused confusion.

The Southeast Asian financial hub wants to develop other aspects of blockchain technology and digital assets separate from cryptocurrencies, Mr. Menon said. He added that the most promising sources of new business for Singapore include speeding up cross-border payments and securities settlement.

Mr. Menon said he also saw potential for innovation in tokenization, the process of converting ownership rights into digital tokens. This could apply to financial assets like cash and bonds as well as intangible assets like carbon credits, he said.

The city-state banned advertising for crypto trading earlier this year, and the regulator said it is considering further measures to protect consumers, although it added that banning retail investing in crypto wasn’t likely to work due to its borderless nature. The regulator hasn’t said how it plans to address the recent failures of crypto firms that have set up shop in the city.

Industry players have said global cooperation is needed to develop better crypto regulations and prevent, or at least mitigate, future market meltdowns. Andy Meehan, chief compliance officer of Asia at Gemini Trust Co., said it isn’t enough if only a few jurisdictions work to strengthen regulation, because investors could use exchanges domiciled elsewhere that aren’t subject to the same rules and have no responsibility to their users.

Mr. Menon said the responsibility ultimately lies with people. “No amount of MAS regulation, global cooperation or industry safeguards will protect consumers from losses if their cryptocurrency holdings lose value,” he said.

Write to Elaine Yu at

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