Ravi Menon, managing director of the Monetary Authority of Singapore recently claimed: “I do hope when the fever has gone away, when the crash has happened, it will not undermine the much deeper, and more meaningful technology associated with digital currencies and blockchain." Singapore’s relationship with cryptocurrencies has been a torrid one. Menon’s wish illustrates how senior financial figures in Singapore understand both the benefits of bitcoin and its ilk, but also have serious reservations about the maturity of this asset class.
In January of this year, Singapore almost banned cryptocurrencies entirely. The MAS voiced their concerns around digital currencies, advising the public “to act with extreme caution and understand the significant risks they take on if they choose to invest." Menon also warned back in January that a bitcoin crash could “potentially cast a larger shadow over fintech, over innovation” suggesting that the city could follow in the footsteps of China and others by outlawing all cryptocurrency trading and initial coin offering (ICO) websites, essentially quashing the market entirely.
However, in the months which followed, Singapore has shown itself to be ahead of the curve compared to other Asian, and indeed global, markets. Singapore has shown impressive vision in expanding and adapting financial services in order to benefit from the opportunities afforded by cryptocurrencies and the technology – such as blockchain – which underpins them.
For example, Singapore has profited off the hesitancy of other countries to adopt digital currencies. China’s ban on cryptocurrencies last year has led to Singapore and Hong Kong emerging as leading destinations for Asian cryptocurrency funds looking to raise money through ICOs. Anson Zeall, chairman of Association of Cryptocurrency Enterprises and Startups in Singapore, recently said that whilst Singapore was not yet an ICO hub, “a lot of significant activity and token issuances” were springing up in the state. According to some sources, Singapore is now the world’s third-largest ICO launch pad in terms of money raised, after the USA and Switzerland.
Equally, Ofo, China’s bike-sharing start-up, plans to use blockchain technology to launch a rewards system in Singapore whereby users will receive cryptocurrency tokens for using its bikes. The fact that some of these companies do not sit in the financial services sector shows how entrenched blockchain is already becoming in wider society. The tide is turning for cryptocurrencies which are slowly but surely gaining a foothold in, and perhaps even an advantage over, traditional business models.
However, despite acknowledging the utility and innovation of this new asset class, Singapore must still face the fact that cryptocurrencies are experiencing the growing pains which are to be expected in a nascent investment product.
Despite astonishing gains in 2017, many cryptocurrencies have experienced extreme volatility thanks in part, to crackdowns on illicit or unregistered investment professionals by regulatory bodies, governments and even technology companies. Governance measures, no matter how positive in the long term, have been a source of extreme volatility and, for many investors, the unpredictability of cryptocurrencies makes them a difficult investment choice.
Similarly, digital asset classes cannot truly enter the mainstream if they are still predominantly associated with fraud, crime and the dark web. Only last month, two bitcoin traders were assaulted in Singapore and robbed of $300,000. Such events raise entirely fair questions about the possible illegitimacy of some investors and developers behind these currencies.
Becoming trusted by traditional banks and asset managers is a crucial step for an asset which only increases in value as it becomes more widely accepted as a secure store of wealth and a means of payment.
This is why interventions, whether from regulators or governments, should be welcomed. Such moves will remove the bad actors and social stigma from the cryptocurrency space and, although they do give markets jitters, will encourage the establishment of an asset class based on true value rather than hype. This is a natural step as the crypto space continues to develop and gain necessary regulatory oversight.
Cryptocurrencies are growing in a jagged upward trajectory. It is only through corrections that we can identify those investment products which are poorly or irresponsibly structured compared to those which can weather volatility and help to build a valuable, lasting and useful tool in financial infrastructure.
To say opinion is divided on cryptocurrencies would be an understatement. Bitcoin’s detractors will not go away. But, critically, neither will bitcoin. It is now entrenched enough within the fabric of business and finance that the debate around it will focus more on its valuation than on its intrinsic value. Irrespective of its price or the volatility thereof, the presence of cryptocurrencies in global finance will only continue to grow.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Chris Keshian is CEO and managing partner of $APEX Token Fund, the world’s first tokenised crypto-focused fund of funds. He is a leading innovator in the blockchain ecosystem, acting as an advisor at BTC Media, Hashed Health and the Nashville Entrepreneur Center, and was the co-founder and CEO of the first fiat gateway onto Ethereum. Chris is also managing partner at the blockchain asset hedge fund Neural Capital, which outperformed bitcoin by approximately 3,000% during the first half of 2017.