For many years there was a situation in the world of blockchain similar to the American approach to the Internet in the 90s: “let's wait and see what happens.” Moreover, there is a good reason for that: first of all, you can ruin everything and make utilization of the technology meaningless by over-regulating the industry. Secondly, the “wait-and-see” approach unties hands and gives freedom of action to those who wish to conduct experiments in this field. But not everyone has found this position optimal: the government of Singapore was one of the first ones to dive head into the depths of the blockchain.
The historical background can give an explanation of such a bold move. The geopolitical position of the city-state plays an important role here: an extremely limited territory and reduced natural resources forced their government to find non-trivial solutions. The country has developed a philosophy that is inherent only to Singapore: “Do more with less.” The innovative potential of the digital economy in general and FINTECH in particular firs almost perfectly on such patterns, especially since the Asian city-state has always been very interested in any innovation in the technological and financial field, and the ICO-boom did not create any panic.
However, there is more than just historical and economic reasons: the systemic crisis is brewing in the country.
Since 2010, all attempts to ensure a long-term GDP growth have not been successful: all efforts to implement innovations in business processes have failed, each initiative to optimize and restructure the economic system has only led to more significant turmoil. By 2017 the financial performance of Singapore has significantly worsened: the GDP growth rate amounted to only 2.5%, and the overall economic forecast showed a complete lack of prospects to change the situation by traditional methods.
Indeed, the real problems will not occur any time soon; it will take a while to exhaust all possible options for development. However, the fact is that it is unlikely to get out of the economic dive without an intensive introduction of innovations. To implement them, the government has given relative leeway to all the participants of digital markets, while limited its role to the creation of a friendly environment in which the digital economy could flourish. For example, the Singapore authorities have already formed a friendly legislative framework for foreign companies, created a specific set of tax preferences and relax visa restrictions for employees of transnational companies.
"Back in February the Deputy Prime Minister and Chairman of MAS Tharman SHANMUGARATNAM said that there is no strong case to ban cryptocurrency trading in Singapore in the foreseeable future. This caused a great surge of ICO and blockchain projects in the country", - said in an exclusive interview to Bitnewstoday.com Herbert SIM, the Commercial Director of the Cryptology exchange and Founder of Crypto Chain, the world's oldest University carrying out research in the field of cryptocurrency and blockchain.
Not only Herbert SIM thinks so: all the market participants note the positive effect created by the state's actions. During a visit to Korea, at the BLOCK SEOUL Summit 2018 Bitnewstoday.com our representative heard a lot of positive feedback from participants about the effects of the Singapore government. It should be individually mentioned that the state has helped to establish a dialogue between the banking system and startups, forming a real ICO supermarket on the background of initially favorable conditions in the country: 11 of the 100 largest ICOs in the world are from Singapore.
Interesting facts about the digital economy of Singapore
- According to the words of the representatives of the Central Bank, Singapore is a crypto-friendly region. “There is no good reason to ban digital currency in the city-state.”
- Operations with virtual currencies are subject to the same taxes as goods and services.
- Since the beginning of the crypto industry, the Singaporean market has been favorable to foreign investments, for example, after China banned virtual assets, the city-state’s market has become a safe harbor for a large number of startups chased out from home.
- Singapore is very cautious when it comes to the security tokens and haven’t approved any of them.
-All Crypto dealings have to go through the MAS regulated Exchanges.
The regulator does not prevent the digital market from developing, but its current policy does not allow the FINTECH industry to go further. According to the words of the CEO of the consulting company Hans KONING, MAS is doing the best possible thing: they are merely following the existing legal framework. However, he is sure, that they will need additional regulations; otherwise, the market won’t grow any further. But they are taking their time with that, MAS is careful enough not to destroy the existing system. This stunts the growth of the industry and market in general.
This is not anything new on the blockchain scene, you can take an example of SEC and their bitcoin ETF dilemma. MAS, just like their American colleagues is not sure that the current regulatory framework of Singapore will be up to the surge of the new opportunities coming their way. But in the legal field - there is nothing new either. “The situation when a regulator is chasing down the flow of events is relatively common, and no one sees anything horrible in it. MAS realizes their lack of competence for properly regulating the market so they are playing it safe. This is is most likely reason why they are carefully avoiding certain themes”, - states Hans KONING.
Herbert SIM considers that at this moment of time - it’s better to avoid dealing with the security tokens altogether, not only in Singapore but worldwide: “The reason is simple - world regulators look at it with a considerable dosage of the skepticism and this alone makes security tokens a big no-no asset in my list.” And this is understandable since regulators are personally responsible for the assets like this and they are not prepared. A recent event in China makes it even more complicated, since the fact that Chinese courts ruled out that bitcoin is protected by law gave huge ground for a legal precedent in the future, since that allows to construct parallels between crypto in general and security tokens, and this makes everything very complicated. For Singapore, that actively tries to establish itself as an international blockchain and fintech hub this is very important since every news like this directly affecting their political and financial situation inside of the country.
For example, MAS will finally register a security token and this will lead to the point when the first event with a massive scam or fraud will lead to the gigantic legal complications, that will turn already uneasy regulatory status of the industry into a huge mess. So regulators have to answer the questions like that: Can cryptocurrency be called a security asset? How can you judge and damage to the fooled investors? How can you classify crimes like that? At the moment, no one will dare to answer them, as the stakes are sky-high.
Considering this and the fact that balance of the system existing in Singapore is somewhat fragile, the regulators are bound to carefully weight each and every pro and con here, since even the slightest mistake might lead to the drastic consequences. This is very important in the face of the rumors about upcoming “Asian Pivot” of the market that will lead herds of the players into Asia and even a slight mistake might lead to the losing them: potential investors will simply take their shop elsewhere.
Obviously, Singaporean government can't allow that, plus their culture is very friendly towards the startups of any kind in general since the innovations and progress that they bring along has been their driving force for many years before that. And government itself is not afraid of blockchain - back in 2017, they have launched a project named UBIN, a collaborative project with the industry to explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities. And this is not just another pilot project or a prototype, this is an actual, working system that has grown to the second version. Aside from that, they also held largest fintech conferences in the world called Singapore Fintech that has gathered 30 thousand visitors from 100 countries.
At the moment, a lot of people have reasons to call Singapore “something like Malta, only in Asia” since Malta serves as a gateway to Asia and Singapore is a road to China. And surprisingly, they are rivals here. On the ASEAN bloc markets they are not competing with South Korea, but with the European country. The reason for this is simple: Brexit. According to the words of Herbert SIM, they will use this for their benefit: “Malta has a huge interest in taking the control over the blockchain and cryptocurrency markets in and out Europe coverage. They will try to establish total dominance in the out of Europe segment of the market.”
But Singapore has an edge here: their location. This is the reason why they are far more interesting from the geopolitical standpoint and this is why a lot of companies decided to establish their base offices in the city-state even if their home countries are fine with crypto.