Singapore overtakes Hong Kong in the number of issued cryptocurrency licenses

What’s new? For 2024, Singapore issued 13 crypto licenses, more than doubling year-on-year. Permits were granted to leading centralized crypto exchanges (CEXs) OKX and Upbit, as well as institutional custodial platforms Anchorage, BitGo, and GSR, among others.

Material by Bloomberg

What else is known? Singapore competes with Hong Kong to become a regional crypto hub by implementing a clear regulatory framework and launching regulatory sandboxes to test innovative technologies.

Some of the experts interviewed by Bloomberg note that Singapore has the advantage at the moment. According to Angela Ang, a senior executive at blockchain analytics platform TRM Labs, Hong Kong’s regulatory regime for exchanges is stricter on a number of important aspects, such as custody of client assets and asset listing and delisting policies.

The approval process in Hong Kong has been slower than expected: the PRC Special Administrative Region has now fully licensed seven platforms, four of which are already operating. Another seven have temporary authorizations. Meanwhile, major CEXs such as OKX and Bybit have withdrawn their applications for licenses in Hong Kong.

The slow pace of licensing goes against the authorities’ plans to turn the city into a crypto hub, so earlier in December, the Hong Kong Securities and Futures Commission (SFC) began assembling an advisory panel to expedite the issuance of permits.

In addition, only the most liquid cryptocurrencies can be traded in Hong Kong, and investors are not allowed to invest in smaller and more volatile coins. According to One Satoshi co-founder Roger Li, it is difficult for companies to meet such strict requirements and remain profitable.

As David Rogers, regional chief executive at market maker B2C2, pointed out, Hong Kong has a different risk profile compared to other countries because it is part of the PRC, and cryptocurrency is banned on the Chinese mainland. Rogers added that Singapore has an advantage in the region due to its favorable environment.

On the wholesale side, both regions are showing progress in attracting regulated financial institutions to experiment with blockchain technology.

In November, Hong Kong announced the elimination of crypto profits tax to attract institutional investors and launched a three-year program to subsidize the issuance of tokenized securities. In addition, back in April, Hong Kong authorized trading in bitcoin and Ethereum-based spot exchange-traded funds (ETFs), but inflows are very small compared to similar products in the United States.

The Central Bank of Singapore is also exploring the benefits of tokenization through its Project Guardian and Global Layer 1 projects.

Ben Charoenwong, a professor at INSEAD Business School, notes that Singapore’s regulatory system encourages interaction between new entrants and established institutions, while Hong Kong’s focus on established financial institutions creates fewer opportunities for new entrants and limits innovation.