On 22 May, the Monetary Authority of Singapore (MAS), de facto the central bank of the city-state, proposes to amend existing rules that will facilitate entry to the market for decentralized exchanges based on the blockchain.
To facilitate the work of decentralized cryptocurrency exchanges
According to the published advisory document, MAS states that the current regulatory framework of one-time “recognized market operators” (RMO) is not able to meet the demand for new business models based on such new technologies. To solve this problem, the authorities propose to introduce a three-level structure in an attempt to facilitate access to markets for small exchange platforms.
MAS wrote in the document: “MAS has observed the emergence of new business models in trading platforms, including trading facilities that make use of blockchain technology, or platforms that allow peer-to-peer trading without the involvement of intermediaries. As the current RMO regime has been in place since 2002, it is timely to review the regulatory framework for market operators to ensure that it continues to meet the demands of the changing landscape.”
In particular, level 3 of the proposed structure applies to market operators that are significantly smaller than established exchanges and are designed to enable them to implement blockchain and P2P technology and deploy services in a controlled environment.
“This new tier is designed to facilitate new entrants”
that develop solutions for wholesale market participants or market operators that have reached the end of their sandbox tenure and are commercially viable, but whose businesses are not able to meet the requirements of the existing RMO regime” explained MAS.
Currently, the body monitors the currency market in two categories: approved exchanges (AE) and recognized market operators (RMO). The first refers to “systemically important” platforms available to retail investors, such as the Singapore Stock Exchange.
On the other hand, the RMO framework allows the regulation of other exchanges, for example, for trading in commodities and derivatives, which will fall under level 2 of the new proposal, if this proposal is accepted.
Singapore turns into cryptocurrency and blockchain hub
Although it is a small island country with a population of only 5.6 million people, it is an international fintech center with more than 200 banks and innovative laboratories from international financial institutions, including Wells Fargo, UBS, DBS Bank, Citigroup, and MasterCard.
Because of Singapore’s business-friendly environment, innovative ecosystem and diverse talent, it also hosts a large number of new startups. According to Ravi Menon, a high-ranking official from the Central Bank of Singapore, the Monetary Authority of Singapore (MAS), there are as many as 50 startups that are working on technology based on the blockchain. A growing blockchain ecosystem supports these startups. Local universities in Singapore are studying technology, venture capitalists are eager to invest, and large technology companies are studying the blockchain.
Also, in 2016, MAS also cooperated with R3 to form the Ubin project, a blockchain-based project that makes financial transactions and processes cheaper, more stable and more transparent.
“Singapore is one of the countries in the world that is leading the way for the revolution and adoption of blockchain technology“
This can be seen in both the private sector industries as well as amongst various government projects and initiatives,” said Gaurang Torvekar, co-founder, and CEO of Indorse.
Development of the detachment at the highest level
The Central Bank of Singapore is one of the first in the world to work with blockchain technology.
In 2016, according to the MAS website, the Central Bank of Singapore launched a joint project called Project Ubin to study the technology of blockchain transactions concerning clearing and settlement payments and securities. The project involved a consortium of financial institutions, including Credit Suisse, DBS Bank, Singapore Exchange, UOB Bank and Bank of America Merrill Lynch.
Sopnendu Mohanty, the chief financial officer of MAS, told CNBC in October 2017 that Singapore has a progressive approach when it comes to new technologies.
“Don’t fear doing experiments and don’t fall into traps of signaling policy changes”
Some regulators are afraid to do experiments because of this tremendous external pressure on them. We are trying to drive that culture globally,” he said.
The first stage of the Ubin project was a proof of concept. The evidence of the idea included interbank payments on blockchain technology. MAS announced its successful completion on March 9, 2017. MAS also successfully developed software prototypes with the Association of Banks in Singapore (ABS) from “three different models for decentralized interbank payment and settlements with liquidity savings mechanisms.“
The regulatory landscape of Singapore is known all over the world for its business-friendly environment and technological innovation. However, cryptocurrencies are a relatively new area, which carries a large number of risks.
There is no reason to ban cryptocurrency
But despite this, the Singapore government indicated that it does not see the need to ban the trade in cryptocurrencies.
Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore (MAS) Tharman Shanmugaratnam in February written response to the question of deputies said that the cryptocurrency and related trading activities currently do not pose any threat to Singapore’s financial system. He stated that MAS “closely studying these developments and the potential risks they represent. As of now,
“there is no strong case to ban cryptocurrency trading here”
The comments came as a direct response to lawmakers Saktiandi Supaat, Lim Biow Chuan, and Cheng Li Hui, who appealed to the Prime Minister about the possibility of ban cryptocurrency in Singapore, according to a request before the February 5 parliamentary session.
The Deputy Prime Minister wrote: “For now, the nature and scale of cryptocurrency trading in Singapore do not pose risks to the safety and integrity of our financial system. Its use in making payments is small, and trading volumes of cryptocurrencies in Singapore are also not high – they are much smaller than in countries like the U.S., Japan, and South Korea.”
The fight against “evil”, not with technology
Thus, Shanmugaratnam said that the regulators “do not have broader, systemic risk concerns with regard to cryptocurrencies”.
The commentary also corresponds to the October 2017 report, in which Ravi Menon, the Managing Director of MAS, indicated that the central bank would not regulate cryptocurrencies.
Nevertheless, Shanmugaratnam stated in his written response that the institution is aware of the possible use of cryptocurrency in illegal activities such as money laundering and takes appropriate measures to solve this problem.
The MAS will set AML / CFT requirements for intermediaries who buy, sell or exchange cryptocurrencies, he said, adding: “We set out this AML/CFT regulatory framework for virtual currency intermediaries last year as part of our public consultation on the proposed Payment Services Bill ”
Asian cryptocurrency oasis
The Singapore approach can be called more libertarian than some other Asian countries, especially when compared with the hostile approach of Vietnam and Indonesia. On the other hand, Thailand and the Philippines took a softer stance.
The reasonable approach chosen by the Singaporean authorities in relation to the cryptocurrency and the blockchain corresponds to the path that this city-state passed on the path of development and prosperity. Singapore turns into cryptocurrency and blockchain hub, and this will not only keep up with the latest technologies, but it is also possible to lead in many areas of fintech and will contribute to its even greater prosperity.