How big exactly is the cryptocurrency market in Singapore? Very small, according to Senior Minister Tharman when he addressed Parliament in April. He mentioned the 3 major trades in SGD (SGD/BTC, SBD/ETH and SGD/XRP) adds up to just 2% of the daily trading volume of Singapore Stock Exchange in 2020.
Was Tharman right? Yes, in so much as the SGD/crypto pairs are concerned. However, currency pairs involving SGD forms only a tiny fraction in the cryptocurrency market. The major pairs are USD/BTC, BTC/USDT (Tethers) and some others. To quantify the market size, certainly the volume must include all currency pairs. The data is not available but the market is obviously way much bigger than what the minister indicated.
To what extent has Singapore adopted cryptocurrency? The Global Cryptocurrency Adoption Index 2020 by Chainanalysis has Singapore at number 50 out of 154 countries. This Index expresses adoption at the grassroots level of everyday users. Its methodology and metrics accounts for a country’s population and wealth in addition to pure market size.
Drilling down to the 4 metrics for Singapore:
Singapore is ranked at a significant high level at 8th place in terms of the number of users. This is not in terms of actual numbers, but on population-weighted basis. It represents a high percentage of Singapore residents are investing in cryptocurrencies relative to other countries.
Caveat : This Index relies only on on-chain data for the first 3 metrics. Obviously off-chain data is not available. It is also not possible to detect the correct countries where users operate through VPNs. The 4th metric P2P data is off-chain. It is based only on data from 2 of the largest P2P platforms. Thus this metric does not capture all trades but a good portion of it for a fair approximation.
To view the Global Crypto Adoption Index with full metric details, click here.
Cryptocurrency prices move with no apparent economic fundamentals. Its high volatility makes it a very high risk market, especially for retail investors. The Monetary Authority of Singapore has periodically advised the public “to act with extreme caution and understand the significant risks they take on if they choose to invest in cryptocurrencies."
While the MAS cautions the public, the government is keen on building Singapore as an East Asian Hub to attract cryptocurrency companies and executives to its shores. Binance, the world's largest crypto exchange by trading volume, and it's CEO Changpeng Zhao, has moved to the city-state in recent years whilst 5 other jurisdictions are conducting investigation into their operations and UK has banned the company. There are more than 90 companies offering “digital payment token service” operating in Singapore under licence exemption until they have been formally approved. About 170 companies have applied for licence under the Payment Services Act (2019) which governs digital payment token services.
Payment Services Act 2019 was passed to regulate crypto token payment service providers. These entities are regulated primarily for money laundering and terrorism financing risks. MAS vets applicants for the robustness of their risk management systems, compliance requirements and standards. The regulatory regime covers the extent necessary to protect customers and includes the FATF's “Travel Rule” guidance that requires maintenance of personally identifiable information (PII) about customers sending and receiving funds over a certain amount. So even as many countries are clamping down on cryptocurrency companies over concerns of unregulated activity, high energy consumption, money-laundering or terrorist funding, Singapore has now officially recognised this virtual financial industry. And cryptocurrency companies love Singapore for the regulatory clarity.
Early this month, Independent Reserve, an Australian exchange, became the first to receive an “in principle” approval from the MAS. The industry is excited with this. Singapore is confidently poised to take advantage of the China overreach as it implements stricter control measures on the freewheeling industry. Operators in mainland China and Hongkong are fidgety and likely to relocate offshore. Singapore's open arms beckon. Building the cryptocurrency ecosystem sits well with Singapore's position as a major financial market and its goal of developing fintech and blockchain innovation, as well as in wealth and asset management.
