Why Singapore could be the ideal place to rebuild post-crypto winter

The crypto winter has been hard for many people and companies. As of June, nearly USD 400 billion of value has been wiped from cryptocurrencies as the market cap for the industry fell below USD 1 trillion for the first time since January 2021. The sudden downward spiral of cryptocurrency led many companies to freeze their customers’ accounts, and major companies such as Celsius, Three Arrows Capital and Babel Finance were also hit hard – driving the market into further despair.

But it’s not all doom and gloom. Post-crypto winter is the time to reflect, rebuild and reframe the conversation around cryptocurrencies from speculation to utility – and there may be no better place for that than Singapore.

Reflections for a better ecosystem

Since Terra’s collapse, countries around the world have accelerated the review of crypto regulations. In June, Japan became the first country to regulate stablecoins for investor protection, legally defining stablecoins as digital money where holders have the right to redeem them at face value. Regulators in the US are also pushing for better clarity about cryptocurrencies, such as designating an authoritative body to define and regulate them. Better regulation will be key to building trust and confidence in cryptocurrencies.

Singapore is well positioned to regulate cryptocurrencies for a better ecosystem. The country is working to expand its digital assets while managing the risks. Singapore now has regulations in place that discourage crypto speculation and prohibit companies from advertising crypto trading services to the public. Some companies saw these rules as too strict, and have chosen to move to a more “pro-crypto” environment. But others, including the Digital Treasures Center, choose to stay in Singapore for the government’s pragmatic and responsible approach.

Singapore’s regulatory clarity allows businesses to self-assess whether Singapore is right for them. The government provides support to fintech companies and grants for digital acceleration. Singapore also offers a strong support ecosystem, with three associations – Association of Crypto Currency Enterprises and Start-ups Singapore, Blockchain Association Singapore and Singapore FinTech Association – that companies can join to improve the industry and provide regular feedback to regulators and government agencies.

Singapore takes a cautious, responsible and long-term approach that leverages crypto for a better society. Singapore regulators are looking for cryptocurrencies and blockchains to provide real economic value, such as improving underlying processes for an existing activity or providing a more efficient solution to an existing problem.

Reconstruction of the industry

Currently, many crypto companies are facing severe liquidity crises, downsizing and hiring freezes. Mergers and acquisitions are taking place across the crypto industry, weeding out companies without strong fundamentals or products. For example, Goldman Sachs is looking to buy up distressed assets from cryptocurrency lender Celsius, while cryptocurrency exchange giant FTX is looking to buy BlockFi. Mergers and acquisitions can also weed out bad players in the crypto industry and channel capital to better projects.

In the rebuilding of the crypto industry, some government authorities are bringing together stakeholders to use different use cases of cryptocurrencies and blockchain to solve real-world problems, such as tokenization and cross-border settlements. Singapore is a good example of a government that is committed to rebuilding the industry and driving crypto development that provides utility. In fact, the Monetary Authority of Singapore (MAS) has partnered with private sector blockchain companies in Singapore and beyond to innovate with projects such as:

• Project Guardian, which explores the financial potential and value-added use cases of asset tokenization.
• Project Ubin, which explores the use of blockchain and distributed ledger technology for the clearing and settlement of payments and securities.
• Project Dunbar, which proved that financial institutions could use central bank digital currency (CBDC) issued by participating central banks to transact directly with each other on a shared platform.
• Bank of Ghana partnership, building a platform to enable decentralized credential verification.

Singapore’s proven track record as a capital markets center also offers crypto companies that survive the crypto winter better access to liquidity.

Reframing the crypto conversation

It’s high time to reframe the narrative and goals around crypto from speculative gains to intrinsic value, and Singapore is leading the way with MAS fintech CEO Sopnendu Mohanty asking how crypto projects create value.

Many Singaporean crypto companies are proving that crypto can be used to solve real-world problems. For example, there are Singaporean companies embracing crypto as an alternative payment method to reduce settlement time and foreign transaction fees, and others aiming to solve blockchain platforms’ scalability problem.

The crypto industry is in its infancy and has enormous potential to positively impact society, but stakeholders in the ecosystem need to actively commit to a shared vision, and look back at the ways they have approached crypto in the past.

With the right regulations and incentives in place, Singapore can guide the over 600 blockchain companies headquartered in Southeast Asia to leverage their collective strength and develop products to address issues such as interoperability, cross-chain compatibility and token stability. Singapore is the ideal place to rebuild a responsible crypto industry. The country has a strong foundation for developing a responsible and innovative crypto ecosystem, and in its latest report, MAS seeks industry feedback to further safeguard consumer interests. It drives a shared vision of developing the crypto industry as a way to improve society, starting with crypto projects that offer economic value, financial inclusion and utility for the betterment of society.