Overall adoption rates decline as almost half of all potential investors see tighter regulation as a concern.
Singapore didn’t cut any corners when significantly strengthening stablecoin and digital asset regulation last year and the impact is starting to show, according to figures from a major industry provider.
The «2024 Global State of Crypto Report» compiled by Gemini, a cryptocurrency exchange, shows that the adoption rate of such investments in the city-state fell to 16 percent of investors from 20 percent.
Outpacing Other Regions
That was a perceptible decline from the same report compiled two years earlier. Not only that, but the fall in Singapore was a clear outlier compared with other places.
Gemini indicated that ownership in the US and the UK remained stable at 21 percent and 18 percent respectively while in France it even rose slightly to 18 percent from 16 percent.
Worried about Regulation
Moreover, almost half (49 percent) of Singaporeans not invested in crypto saw regulatory concerns as a barrier in the same report. That is significantly higher than the 38 percent of US and UK investors and 32 percent of French investors who think the same.
Lest we forget, the crypto-winter of 2021 and 2022 exacted a deep toll on Singapore. Market valuations dropped by two-thirds, and the now former managing director of the Monetary Authority of Singapore (MAS), Ravi Menon, had to deal with several direct casualties on his doorstep, among them the Three Arrows Capital hedge fund.
Failed the Test
It also appears that Menon hasn’t gotten completely over what happened then. At an address at the annual Point Zero forum in Zurich this July, he said that «private» cryptocurrencies «have failed the test of money».
«They have performed poorly as a medium of exchange or store of value beyond that for purposes of speculation,» Menon stated at the event.
Long Laundry List
In the meantime, as finews.asia has extensively documented, the list of prerequisites required for crypto-providers in Singapore is a long one.
Anyone launching cryptocurrency products with Singapore dollars or in G-10 currencies will have to comply. As part of that, they must hold 100 percent of the par value of the outstanding amount of money in circulation as reserves.
Robust Policies
Plus, they will have to maintain robust risk management policies for credit, liquidity, and concentration risk and keep the reserves and client assets in segregated accounts with locally recognized custodians, with the deadline for providers to return funds to clients now set at five business days, even if intermediaries are involved.
Moreover, providers must submit to independent audits on the reserves and face a prudential obligation to fund any business with either S$1 million or half their annual operating expenses, whichever is higher. In addition, they must always be liquid enough to pay half of their operating expenses at any time.
Timely Redemptions
But returning to the Gemini survey - it is uncertain what part of the above is prompting regulator concerns by Singaporean investors, given most requirements are on the provider side and do not seem to directly impact investors.
It would be interesting to find out in a subsequent industry report what the impact of the regulatory labeling of compliant products is, and how a new and more timely redemption policy is being received.
Redemption Deadlines
Otherwise, one of the only rational explanations at this point for the results is that most of the cryptocurrency products on offer in Singapore are unlabeled products. Either that or they misinterpret the deadline of five days as being too long, particularly when compared with conventional financial assets and investments - and traditional forms of liquidity.
But there could also be an entirely different, unwritten side to the equation. Maybe investors had seen the crypto sector as an entirely regulation-free sandbox to speculate in, and that is clearly no longer the case.
