Singapore is set to grant formal regulatory approval to a cryptocurrency exchange for the first time as the Asian city-state steps up its challenge to compete with Hong Kong as a digital finance hub.

Australia’s Independent Reserve Exchange has obtained “in principle” approval from the Monetary Authority of Singapore to operate as a regulated provider of digital payment token services after applying for a license in April last year .

The company is the first such provider to gain approval from the Singapore regulator for around 170 applicants, including the Binance and Gemini global exchanges. Some groups, including Binance, have already been granted an exemption to provide services to the city’s retail and institutional investors while awaiting an official license.

“We have been waiting for this day for over a year,” said a foreign crypto exchange that operates in the city. “Now everyone is wondering who will get the approval next. “

Global cryptocurrency groups have grown rapidly in Singapore thanks to the city’s user-friendly regulatory environment, which stands in stark contrast to other markets that have taken a more stringent approach to the industry.

Regulations vary widely from jurisdiction to jurisdiction, meaning several major global exchanges seek licenses in various countries as watchdogs begin to take a closer look at their operations.

Singapore’s resource-poor economy relies heavily on financial services, and the city’s appeal as a business center has grown as Hong Kong, a competing Asian financial center, has been seen as less attractive by under a national security law.

The digital asset industry has become another front in the competition from rival cities.

“All eyes on Singapore”

As in mainland China, Hong Kong has taken a tougher stance on the free-wheeling cryptocurrency industry. The city is set to restrict crypto trading to accredited or institutional investors under a new law.

Singapore, meanwhile, has made it easier for foreign crypto groups to establish offices and serve residents and businesses, albeit with restrictions, including limits on transaction volumes. It introduced a payments law in January 2020 under which companies can apply for a license. About 90 digital asset companies have applied and are operating under an exemption.

On Monday evening, Independent Reserve, founded in 2013, received approval to operate, sending ripples of enthusiasm across the industry in anticipation of more green light to come. The company has 200,000 customers in Singapore, Australia and New Zealand.

“All eyes are on Singapore and its regulatory regime,” said Raks Sondhi, managing director of Singapore-based Independent Reserve.

MAS wants to make the city-state a global hub for the blockchain ecosystem and the “long process” to obtain the license was due to the regulator’s emphasis on consumer protection and countermeasures. against money laundering, he added.

These included the implementation of the “travel rule,” which requires crypto companies to share personally identifiable information for transactions above a certain value. All successful applicants in Singapore must implement the rule, in accordance with MAS guidelines.

Eric Anziani, COO of Crypto. com, a digital currency exchange platform with a strong presence in Hong Kong but growing rapidly in Singapore, said geopolitical risk in Hong Kong has intensified. “Singapore is also more favorable to retail investors,” he said. “I think there are more opportunities out there now in terms of talent as well.”

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The head of another world exchange in the city-state said that the “overhang of China” had made Hong Kong less attractive as a crypto destination, especially for custodial services. “Many of our clients were concerned that the Chinese authorities would stumble upon it and take their assets into offline vaults.” – Copyright The Financial Times Limited 2021


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