Crypto goes mainstream

Cryptocurrencies are back in a bull market and the community is yelling booyah! again. The general public is also taking note, for the first time since October, when Mark Zuckerberg testified to Congress on Libra. Bitcoin insiders are now expecting the price to rise further, before the miner reward gets slashed in half in May. Rallies typically drive adoption for crypto, the industry has matured and it’s getting easier for the general public to buy in.

A different party is dabbling in digital money too. Central banks around the world are now openly discussing it and some go even further. The FT reported this week that the People’s Bank of China filed more than 80 patents with the objective to digitise the renminbi. That includes the idea to “algorithmically adjust the supply of a central bank digital currency based on certain triggers, such as loan interest rates.” Interbank settlement and clearing would be sped up behind the scenes. Customers receive digital tokens, while the real assets remain in a safe deposit at the bank.

MAS Chief Fintech Officer
Sopnendu Mohanty speaking at
an industry conference

In Singapore, a new Payment Services Act came into force at the end of January, with an explicit focus on digital payment tokens. The regulator MAS aims to control any payment system that is “crucial to financial stability”. Payment providers will need to apply for a licence and must demonstrate that systems and technology protect their clients’ funds, that AML regulations are followed. Crypto exchanges, brokers and custodians will have 6 months to apply for a payment institution licence.

Hardcore bitcoiners might argue that this defeats the purpose of crypto, which was created as privacy-protecting peer-to-peer money. Those who buy at a licensed institution will have to pass KYC clearance and won’t be able to move funds undetected. Yet the initial success of the coin attracted also many criminals and scammers, who scared away potential investors. The licensing process might add the needed trust factor for them to finally adopt the technology.

And it will likely persuade institutions who are still mostly on the sidelines. A local crypto exchange told me that banks and hedge funds are already knocking at the door and enquire, while waiting for more clarity. Singapore saw many Chinese exchanges setting up shop after a crypto crackdown at home. The new regulatory framework should provide an additional boost to the industry here. I just spoke to Elliptic, a London-based blockchain analysis company providing AML services to banks, who chose Singapore as a base to further expand in the region. The new PS Act might just have kickstarted a fresh upswing.