Singapore's crypto ambitions dashed by three arrows

 A view of the Monetary Authority of Singapore headquarters in Singapore on June 28, 2017. REUTERS/Darren Whiteside.

HONG KONG/SINGAPORE, July 12 - Singapore's ambitious cryptocurrency industry, in some ways the largest in the Asia-Pacific region, faces an uncertain future following the recent collapse of crypto fund Three Arrows Capital, a global digital currency slump. High profile victim.

Crypto players in Southeast Asia’s financial hub are bracing for more bankruptcies and lawsuits, with regulators expected to become less lenient at the Monetary Authority of Singapore (MAS), whose welcoming attitude has helped attract companies from China, India and elsewhere.

Hoi Tak Leung, an attorney in Ashurst’s senior technology division, said: “Following recent events, it seems likely that MAS will crack down on crypto and digital assets.”

According to KPMG, investment in Singapore-based crypto and blockchain companies will grow to $1.48 billion in 2021, a 10-fold increase from the previous year, and will account for almost half of the total investment in the Asia-Pacific region in 2021.

MAS regulators say they want to promote crypto-related services, in contrast to China’s ban, India’s crypto tax that has paralyzed trade, and Hong Kong’s new rules restricting crypto investments for professionals.

In 2020, more than 150 crypto businesses have applied to MAS for new crypto payments licenses, although only a handful have been granted licenses so far.

But three Arrows Capital (3AC) began liquidation proceedings in the British Virgin Islands on June 27 after a global digital currency downturn made it impossible to raise hundreds of millions of dollars for services, court documents show.

3AC did not respond to a request for comment, and its liquidators told a U.S. bankruptcy court they were unable to locate the fund’s founders, Kyle Davis and Zhu Su.

The fallout from 3AC's collapse -- and the market turmoil that followed -- was swift and severe. Singapore-based crypto lending and trading platform Vault said last week it would suspend payments, and the next day a rival crypto lender said it planned to acquire the company.

Another fund, Mirana, is suing 3AC in Singapore over a loan deal, local media reported, citing unpublished court documents. Mirana did not respond to a request for comment.

In the U.S., cryptocurrency lender Voyager Digital (VOYG.TO) filed for bankruptcy last week, days after 3AC defaulted on a $650 million cryptocurrency loan, while cryptocurrency exchanges Genesis and Blockchain.com also disclosed losses from transactions with 3AC . .

Rose Kehoe, CEO of Kroll’s restructuring operations in Singapore, said she expects crypto-related companies facing liquidity issues to take advantage of Singapore’s corporate restructuring mechanism in the coming weeks.

“We will continue to see global crypto markets affected by the contagion effect of recent market events, including in Singapore, a major crypto hub,” she said.

Industry insiders are also wary of the Singapore regulator's response.

“If Singapore decides to take a more aggressive approach to crypto trading in the future, other countries (in Southeast Asia) may follow suit,” said Jeff Mei, chief marketing officer of Singapore-based crypto firm ChainUp.

"(This) can open a void for Hong Kong to enter the stage more meaningfully."

MAS did not comment on the matter, but on June 30, 3AC issued a rare public condemnation of a breach of the fund's rules, adding that the company was under investigation for possible further breaches.

"I think (MAS) wants to send a signal to the industry that '3AC is already on our watch list'," said Hagen Rooke, a partner at law firm Reed Smith in Singapore. Such crimes are usually dealt with in private knuckle hugs, he said.

“The question is whether MAS will become tougher in its handling of the crypto industry,” he added, identifying new rules for crypto lending as a possible regulatory focus.

💌 Resources and references: reuters.com 🔊 Singapore's crypto ambitions dashed by three arrows..