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Singapore’s two speed crypto ecosystem

February 12, 2024

Singapore is undoubtedly one of the power houses of crypto, alongside New York, Hong Kong and London.  It has top-tier capital, talent, and infrastructure.  But how crypto-friendly is it?  Lets take a look at some of the indicators.

In the centralised exchange segment, Singapore leads the way with 22 headquartered exchanges in the territory. Hong Kong and the US are tied second with 14.  Yet only seven of those 22 are incorporated in Singapore.  Why?

Well, licenses from the local regulator,  the Monetary Authority of Singapore (MAS), are hard to come by.  MAS has received almost 600 applications for payment services licenses from crypto businesses since 2020, and it has issued only five full licenses.

Singapore based; Off-Shore Registered

Other jurisdictions provide light-touch, crypto friendly frameworks which make it easier to obtain operating licenses.  That's why nine of the largest Singapore exchanges are domiciled offshore, with five of those incorporated in the Seychelles.  In fact, 20 of the top 130 exchanges are domiciled in the Seychelles. This includes BitMEX, KuCoin, Huobi Global, and OKX, among others.

Hoptrail data indicates that in total 42 of the top 130 exchanges are domiciled offshore.  That increases to 51 if we include Luxembourg, Liechtenstein, Malta and Gibraltar.  This does prompt a separate discussion about regulatory strength - how should we assess a license obtained in the Bahamas versus one in Singapore?  But that is a debate for another time.

Currently nine VASPs hold exemptions from MAS to operate as crypto service providers.  Of the five holding a Digital Payment Token (DPT) License, only two of these are exchanges: CoinHako and Australia-based Independent Reserve.

Two Speed System Creating AML Divergence

This data suggests two things: (1) that the licensing process is slow and lengthy, and (2) there is a two-speed system in play for exchanges: they headquarter there to access capital and talent, but domicile off-shore to avoid oversight.  

This makes it much harder to assess regulatory robustness.  It has also driven a divergence in AML adherence.  For example, CoinHako is among the best scoring exchanges in Risktrail due to its recent licensing win (placing 13th), but Seychelles-registered KuCoin has notable deficiencies, not least optional KYC and privacy token trading.  It scores far lower down the list at 108th.

This is unique.  Of course, this will evolve over time as MAS works through its backlog.  But for now, some of the world’s best regulated exchanges are up against those without any licenses at all.  

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