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By Reed Smith Partners: Bryan Tan and Jill Wong
Following in the footsteps of other jurisdictions, not least the USA, Hong Kong approved initial spot Bitcoin ETFs earlier this month. It was unquestionably a significant step.
Yet, this direction of travel is not being followed worldwide. Several key players in the global cryptocurrency market continue to keep their cards close to their chest, whilst a handful of regulators have made their stance on ETF approvals crystal clear. In Singapore, the Monetary Authority of Singapore (MAS) has shown no signs of following suit. Nor should we expect MAS to approve spot Bitcoin ETFs anytime soon.
Why the MAS holdout?
One reason that MAS may feel confident in continuing to chart its own course is that accredited investors are already able to invest in overseas spot Bitcoin ETFs – a course of action which is being recommended by fund managers increasingly regularly. This is significant for a few reasons. Firstly, it provides these investors with more options for diversification and exposure to the cryptocurrency market. Secondly, it indicates a growing acceptance and recognition of Bitcoin as an asset class by regulatory authorities. Finally, it may contribute to increased liquidity and stability in the Bitcoin market as more institutional investors participate. It is also a recognition that the more well-resourced accredited investors can and do have access to these products available in other markets in any case.
What next for MAS
Over the coming years, MAS is expected to provide clear guidelines and regulatory frameworks tailored to Bitcoin ETFs, addressing concerns related to custody, valuation, liquidity, and investor protection. Regulatory certainty encourages innovation and investment in the cryptocurrency ecosystem, which is still something MAS seeks to foster. The spike in interest in Bitcoin following the initial approvals of spot ETFs and the recent halving event is unlikely to change this.
We also shouldn’t expect to see any reaction from MAS in response to the halving. During previous halving events, it has maintained its position, and even when crypto prices tanked in 2022, it made sure to re-iterate, its regulatory stance. We have every reason to think that not only will MAS stay on the course it is currently charting, but that it is in fact becoming increasingly confident in its regulatory decisions. Moving forward, we expect MAS to be guided by three key factors when it comes to deciding its regulatory stance: enhancing market infrastructure, prioritising investor education and awareness, and collaborating with international partners.
Enhanced market infrastructure
The development of robust market infrastructure, including regulated cryptocurrency exchanges, custodians, and trading platforms, is essential for the introduction of Bitcoin ETFs and similar products. As a result, MAS may well work with industry stakeholders to strengthen market infrastructure and ensure compliance with regulatory standards.
What’s more, we should expect MAS to continue prioritising investor education initiatives to increase awareness of crypto investments and their associated risks. In the long run, educated investors are better equipped to make informed decisions and navigate the complexities of cryptocurrency investments.
International Collaboration
MAS may collaborate with international regulators to establish common standards and facilitate the cross-border offering of these products. Harmonised regulatory approaches promote market efficiency and investor confidence on a global scale, benefitting both Singapore and the global economy.
For Hong Kong, meanwhile, the approvals demonstrate its aspirations to cement itself as a crypto hub. This is certainly a decisive move, particularly in the context of other initiatives such as licensing of crypto-exchanges, which are aimed at encouraging crypto players to come to Hong Kong. Trading in bitcoin and ether ETFs will commence on 30th April and it is expected that investor appetite will be enthusiastic. Both retail and institutional investors will be able to invest. Hong Kong is the first Asian jurisdiction to approve these ETFs and it is largely seen as giving Hong Kong first-mover advantage.
Ultimately, despite significant regulatory changes abroad, Singapore still stands strong as a global crypto hub. It remains one of the most attractive jurisdictions for cryptocurrency businesses, in part thanks to MAS having implemented a balanced approach that maintains protections for investors and financial safeguards whilst still providing an atmosphere that encourages innovation. And if Singapore’s position should start to falter, it is our experience that MAS can move quickly when they want to.
Authors Bio
Bryan Tan (Singapore office) and Jill Wong (Hong Kong office) are partners in Reed Smith’s dedicated crypto and digital Assets group On Chain.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.