Singapore is increasingly emerging as a major crypto hub in Southeast Asia.
While there are many socio-political and economic reasons for this, the major driver for Singapore’s global cryptocurrency development is China’s recent decisions.
China has been cracking down on crypto for years leading to the need for a new cryptocurrency hub
It’s certainly not unusual for China to announce some form of crackdown on cryptocurrencies. In fact, according to Cointelegraph, China and Hong Kong have banned crypto 19 separate times since 2009.
This isn’t quite the case, but various government agencies in China have repeatedly issued various prohibitions and interruptions within the country’s crypto space, stopping short of an absolute legal ban.
While these measures have cropped up over and over, the cryptocurrency sector in China continued to thrive regardless.
But this time, it’s different.
Two documents categorically outlaw crypto in China
China’s National Development and Reform Commission and its Central Bank issued two legal documents on 24 September 2021. The first document completely prohibits crypto mining, while the second categorically declares that all cryptocurrency transactions are now illegal.
This means that every company in China operating within the cryptocurrency sector is illegal and considered to be engaging in illicit financial activity by the authorities. The general reaction was a tacit collective understanding that this time, China is serious about banning crypto.
China’s crypto ban is absolute – there really is no room for conjecture. The Government has made it clear that the entirety of the sector is now illegal in the country. The documents were signed by a swathe of officials, including the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security, suggesting that even attempting to flout these new laws would be a very bad idea.
Crypto linked firms are shutting down crypto operations
In the wake of this announcement at the end of September this year, many cryptocurrency firms, platforms, wallets and exchanges have ceased to provide services to people who live in China.
The official documentation specifies that exchanges based overseas that cater to people who live in mainland China must immediately stop doing so. This is despite the fact that we don’t yet know how much the new rules will be enforced against individuals.
But it certainly seems that any Chinese citizen working for a cryptocurrency firm overseas could also be at risk of being arrested and investigated for illegal activity.
Anyone who is familiar with cryptocurrencies won’t be surprised at the suppression of the sector in China. It was inevitable due to the unregulated nature of the sector. This would never fit in with China’s policy of a tightly controlled state governed economy.
China mistrusts the deregulation of the cryptocurrency sector
China has also been clear that the speculative and unpredictable nature of the industry isn’t part of the country’s economic plans. Its five-year economic plan is very clear that the financial future of China rests on what it calls ‘the real economy’ and not virtual speculation.
It boils down to China’s mistrust of digital currency and the idea that it cannot be linked with true financial security or the country.
It’s also likely that China’s announcement of becoming carbon neutral by 2060 and ending the increase in carbon emissions by 2030 has contributed to the crackdown on crypto mining. Chinese authorities believe that crypto mining essentially isn’t worth the emissions.
However, with typical obfuscation and confusion, China is also launching its own digital currency. As the state would back this, it would essentially offer the same benefits in terms of digital transactions but would not be decentralised.
State-controlled Chinese digital currency is being trialled
The currency is called the Digital Chinese Yuan, and it’s likely that for Beijing, there is little logic in launching it against the competition of all of the decentralised cryptos. China intends the Digital Chinese Yuan to be usable for overseas visitors to the Beijing Winter Olympics in 2022.
Experts in Chinese crypto say that it’s unlikely that the new crackdown on crypto will go after people owning a digital currency. But it is clear that should they be scammed by any kind of scheme linked with cryptocurrencies, they’re on their own. People in China will continue to trade cryptos using VPNs or exchanging offline. However, there will be much higher risks for investors and zero protection.
For now, then, the crypto sector in China is over. Traders are forced to find other ways to work in the sector or just give it up. Crypto miners are moving to other countries, such as the US, Canada and Kazakhstan. If they’re not doing that, then they’re selling their rigs for low prices.
How Singapore is welcoming China’s crypto entrepreneurs
All of this action by China against cryptocurrencies is shifting attention in SE Asia elsewhere – to Singapore.
Singapore is now welcoming investors, crypto enthusiasts and exchanges from China, leading to the growth of its own sector.
Here’s a list of some entities in the space that have shut down since the Chinese crackdown and are creating new opportunities in Singapore:
- Huobi – one of the biggest crypto exchanges in China, will shut down all accounts by the end of 2021.
- Other China-based exchanges BitMart and BiKi, are doing the same.
- CoinMarketCap and CoinGecko (crypto price comparison platforms) are no longer functional in China.
- Weibo and other social media crypto communities are shifting to Telegram, Discord and Twitter.
According to Reuters, capital outflow from Chinese crypto exchanges in H1 2021 into overseas exchanges stands at $28.3 billion.
Singapore will continue to adapt to its role as the major crypto hub in Asia
Here are some of the Chinese entities that are now operating in Singapore:
- Binance, the world’s biggest crypto exchange.
- OKCoin, Huobi and ByBit are all up and running in Singapore.
- Crypto financial services company Babel Finance opened an HQ in Singapore in September 2021.
Singapore is a stable and welcoming environment for entrepreneurs in the cryptocurrency sector. As a major financial centre in Asia, Singapore has fully embraced the evolution of fintech and has been paving the way for crypto ownership, use and trading for years.
In 2020, Singapore’s Monetary Authority (MAS) implemented legislation to regulate the cryptocurrency industry within its Payment Services Act. This kind of regulation safeguards both the Government and the user.
So far, MAS has licensed major investors, including the Independent Reserve – a crypto exchange based in Australia and DBS Vickers, which is the brokerage arm of DBS Bank. Singapore has also implemented regulatory measures for various crypto related activities, including crypto fund management, securities and payment tokens.
All of this will continue to entice Chinese crypto traders and investors and increase the sector’s presence in Singapore.