There is no doubt that blockchain is one of the most innovative technology worldwide, benefiting a variety of industries. Despite blockchain’s outstanding features, blockchain regulations, a key part of its development, have not been given much attention in many places. Singapore is an exception.
Unlike other Southeast Asian countries that still remain skeptical about the risks blockchain technology, the Singapore government, through its central bank, the Monetary Authority of Singapore (MAS), has launched several programs to support blockchain. Thanks to such factors as tax-friendly regulations, light-touch regulations, and state funding, Singapore has long been well-known for nurturing blockchain startup companies looking to launch an Initial Coin Offering (ICO).
An official of Monetary Authority of Singapore (MAS), which serves as the central bank and financial regulator of Singapore, during an interview with Bloomberg, recently said that MAS will keep “an open mind” with no plans of regulating cryptocurrencies. At the same time, the Singapore government, in early 2014, declared Bitcoin as a good that can be purchased (even if it itself can purchase goods) and therefore subject to a specific to a specific tax. So while it can be used, it is privy to a double-taxation (once when it is purchased, and once when it purchases an item).
It is a known fact that cryptocurrencies are often misemployed for illegal activities like money laundering and financing of terrorism. Therefore, legal frameworks must act as oversight. In March 2014, MAS released a statement saying the digital tokens themselves would not be regulated, but that intermediaries would fall under MAS regulations citing terrorism and money laundering.
MAS has also indicated that they will apply regulation around cryptocurrency, rather than the cryptocurrency itself. MAS Managing Director, Ravi Menon said that: “We’ve taken the approach that the currency itself does not pose the risk that warrants regulation. Our approach is to look at the activity around the cryptocurrency and then make an assessment of what regulation would be suitable.1”
Singapore has long been known as one of the most favored destinations for blockchain companies.
Apart from favored blockchain regulations, Singapore is promising to become the Asian Blockchain Hub as the country’s policies in nurturing blockchain development. In recent years, the city-state has proven to be a force to be reckoned with in this fintech space. The country now boasts of about 400 fintech companies and welcomed more than 20 global financial institutions setting up innovation labs to test out new ideas.
MAS has completed its first experiment on using blockchain for interbank payments in Singapore, showing that such payments can be done without MAS as a central party, and that netting of payments can be done without having to give up on transactional privacy. Besides, in late October, MAS began a Fintech partnership with its counterpart in Hong Kong. The partners committed to working on a strategic project on trade finance cross-border infrastructure based on blockchain technology. Such technology may reduce risks of fraud in invoice financing, and can cut down the paperwork having led to inefficiency.
Infinity Blockchain Ventures (IBV) recently attended the Singapore Fintech Festival which focused on many aspects of emerging technologies in Singapore. Of particular interest was an opening speech2 by Ravi Menon regarding the present and future of the city-state in respect to blockchain and other 4.0 technologies. He gave in-depth descriptions of the efforts to transform Singapore into a FinTech Hub thanks to government and private institution efforts. He explained, for example, that last year, DBS Bank and Standard Chartered Bank completed a proof-of-concept that demonstrated how blockchain technology could enable banks to detect if an invoice had already been financed. Shortly after, HSBC and Bank of America did a proof-of-concept that showed how trade finance processes could be streamlined using blockchains and smart contracts. Moreover, he was pleased to announce a collaboration on cross-border payments with the Bank of Canada using blockchain technology.
Blockchain is clearly a large part of what Ravi believes will be a bright, innovation-filled future for Singapore’s financial sector. He said this future depends on “a restlessness to make things better, a spirit of enterprise to try new ways, a willingness to take manageable risks, and the resilience to bounce back from failure to try again … and again.” If FinTech can gain trust and stability and have a larger purpose to solve real-world problems, then there is no end to how much Singapore can achieve in adopting new technologies like blockchain.
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