As the crypto markets continue to wobble, Singapore regulators will be keeping a closer eye on local companies that are dealing in cryptocurrencies after the recent collapse of stablecoin Terra.
Terra suffered a sharp fall from a market cap of $41 billion to $6.6 million. While its plunge to earth was due to a number of factors, including the recent sell-off in tech stocks, it has also raised concerns about the stability of stablecoins. Experts are taking a wait-and-see approach to assess the true cost of the crash.
“Unlike larger rivals such as Bitcoin and Ethereum, Terra did not have customer deposits backing it up. Instead, its stable value of $1 was based on faith in its underlying algorithm, which maintained its value by printing a sister cryptocurrency, Luna,” notes Alex Hern and Dan Milmo of The Guardian.
According to an analysis by Coindesk, Singapore regulators have been keeping a close watch on the crypto industry for several years. With the collapse of Terra, authorities are expected to crack down on crypto companies even more.
Like many crypto firms, Terraform Labs, the company behind the Terra protocol, operates in Singapore with a registration agent. This means that the company lists a Singaporean address being shared by hundreds of other companies.
The company also has co-working space offices in various countries around the world, but no formal headquarters.
The report highlights several questions stemming from this set-up, such as whether a legal case can be made against the companies behind the protocol by the token holders and what sort of assets could be seized.
Analysts have also raised the question of whether Singapore regulators have jurisdiction over Terra co-founders Do Kwon and Daniel Shin. Apparently, both provide addresses in Singapore on company filings with local authorities, but it’s unclear if they reside there full time. Kwon also maintains a residence in South Korea.
In 2021, the city-state’s central bank warned against investing in digital assets, citing their high volatility.
“The prices of crypto tokens are not anchored on any economic fundamentals, and are subject to sharp speculative swings. Investors in these tokens are at risk of suffering significant losses,” said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS).
More recently, in April, Singapore’s Parliament introduced a new law that will require crypto companies with a local presence to secure a license if they want to offer services abroad. The main purpose of this is to prevent money laundering, but it also leaves the door open for future expansion.
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