Original Author: Jade, Foresight News

Original Editor: halou.eth, Foresight News

With over 300 exhibitors and more than 200 off-site events, and tens of thousands of attendees from around the world… TOKEN2049 is perhaps the largest Web3 event of the year.

People gathered at the iconic Marina Bay Sands Hotel in Singapore, rubbing shoulders and engaging in lively social interactions. But outside the walls, on the streets of Singapore, people went about their daily routines as usual. In the heart of Asia's Web3 center, the concentration of Web3 on the streets of Singapore approached zero.

After landing in Singapore, Foresight News randomly interviewed 7 locals, two of whom said they had purchased cryptocurrencies, while the majority expressed a lack of understanding, with three of them considering it a scam.

In fact, since January 2022, Singapore has prohibited cryptocurrency projects from promoting their products to local residents. Promotion of Web3 on websites, broadcasts, billboards, and other platforms has been completely blocked. In contrast, in April of this year, during the Web3 Carnival in Hong Kong, advertisements for Web3 were posted on the streets and buses.

Another noticeable contrast is the enthusiasm for embracing Web3 shown by Hong Kong's Chief Executive Carrie Lam, Financial Secretary Paul Chan, and University President Rocky Tuan, compared to the almost complete absence of Singaporean officials at TOKEN2049 and their rare acceptance of related interviews.

During TOKEN2049, many Hong Kong legislators (Wu Chi-wai), government officials (Christopher Hui), and university presidents (Rocky Tuan) came to show their support, while as the "host," Singapore had no political or academic leaders present at the event.

"They have never appeared. For the Monetary Authority of Singapore, TOKEN2049 represents speculation," said Professor Li Guoquan of Singapore Management University, adding that this is not surprising. "TOKEN2049 still misses the point of Web3."

"Singapore has hosted many conferences at the same time, such as the Global Biopharma Summit, Milken, Forbes Global CEO Conference, SuperReturn, and many other traditional financial events, which are actively attended by both the government and business sectors… TOKEN2049 is just a small part of it," said Lily Z. King, COO of Cobo.

For cryptocurrency practitioners, TOKEN2049 is significant, but for Singapore, it is relatively insignificant.

In the midst of the bear market, Singapore remains restrained

Over the past year, Singapore has appeared somewhat "distant" from Web3.

It does not want to miss out on new technologies but also deliberately maintains a certain distance. Compared to the "closeness" between Hong Kong and Web3, Singapore's relationship with Web3 shows a kind of ambiguity, as if it still wants to keep its distance from it.

"Singapore likes to innovate and experiment with large institutions. After the FTX incident, Singapore is not very willing to let its own people and investors speculate on coin prices, but they are very proactive in promoting blockchain technology, and in many ways, their ideas and what they want to do are very cutting-edge and open," said Lily.

"For example, this year I went to Switzerland with MAS (Monetary Authority of Singapore) to attend the PointZero Summit, where MAS and the Swiss Financial Market Supervisory Authority participated in a debate between Circle, Paxos, and traditional banks, discussing cutting-edge topics such as why we need stablecoins or tokenized deposits, while officials from the monetary authorities acted as judges and commented on the debate."

"The regulators in Singapore are concerned about the practical applications of the combination of Grab (equivalent to Didi in foreign countries) and stablecoins in economic life," Lily added.

However, Singapore's openness to cryptocurrencies is extremely restrained, seemingly limited to technology and large institutions. In a broader sense, Singapore gives the impression of a reserved welcome.

Singapore's regulatory attitude towards Web3 is often quoted by interviewees in Foresight News interviews with two statements.

First, Ravi Menon, Managing Director of the Monetary Authority of Singapore, said in a speech in November last year, "Singapore hopes to become a center for digital assets, but does not want to become a center for speculative cryptocurrencies."

The second statement was made by Deputy Prime Minister and Minister for Finance Heng Swee Keat in November, "Singapore has no plans to become a hub for cryptocurrency activities, but aims to be an innovative and responsible participant in digital assets."

These two statements were made after the well-known FTX collapse. When TOKEN2049 was held last year, FTX founder Sam Bankman-Fried was still in the spotlight as a prominent guest.

Just one month later, the $32 billion financial empire collapsed. According to statistics, at least 4.2% of Singapore users had used FTX and were affected by the collapse. Temasek, Singapore's sovereign wealth fund, is still being held accountable for investing $275 million in FTX, and the salaries of company executives and related teams have been cut.

This year, while the tide is rising in Hong Kong, the Lion City is no longer bustling.

According to data from FinTech Global Research, transaction activity in Singapore's fintech sector has declined for the first time in the past five years. In the first half of 2023, there were 84 transactions in Singapore's fintech sector, a 27% decrease from the first half of 2022.

Some say that FTX's collapse has caused a "sudden turn" in Singapore's attitude towards Web3. Is this really the case? What has Singapore been doing over the past year?

This year, apart from the Monetary Authority of Singapore repeatedly warning against speculative behavior, there have not been many visible actions from Singapore. On August 15, the Monetary Authority of Singapore announced the final version of the regulatory framework for stablecoins, making Singapore one of the first jurisdictions in the world to include stablecoins in its local regulatory system.

On September 4, the Monetary Authority of Singapore announced that it would introduce a series of regulatory measures by the end of the year, making Singapore one of the jurisdictions with one of the strictest regulatory systems for retail use of cryptocurrencies.

While strengthening retail regulation, the Monetary Authority of Singapore is also providing funding support. In August, the Monetary Authority of Singapore announced that it would invest S$150 million in emerging technologies such as Web3 over the next three years. The Monetary Authority of Singapore is calling for the use of innovative Web3 technology in industry use cases and will provide grant funding to support practical experiments and commercialization.

"This is not contradictory. Singapore has never relaxed its regulation of retail cryptocurrency.," said Adric, Market Manager of dtcpay. Currently, 11 institutions in Singapore have obtained Digital Payment Token (DPT) licenses, and dtcpay, a Singaporean cryptocurrency payment provider, is one of them. "The government is more inclined to promote the use of virtual currency for payments rather than encouraging trading."

In fact, Singapore's attitude towards Web3 has never undergone a "sudden turn," but after the FTX collapse, the focus of regulation shifted from anti-money laundering and counter-terrorism financing to investor protection on the retail side.

Founder Liu Jia Alice, who previously served as Managing Director at China Minsheng Bank, decided to establish dtcpay while pursuing an EMBA at the National University of Singapore in 2019. dtcpay aims to develop encrypted payment channels in the Singapore market, providing regulated cryptocurrency payments for institutions and retail users. dtcpay told Foresight News that its user base has grown by 200% since January, and transaction volume has quadrupled.

Anson, Compliance Officer at dtcpay, said that compliance does require a significant investment. They have to provide data such as transaction volume to MAS every month and undergo external audits annually.

"We have been here for a long time and have been in communication with banks and financial institutions here. Some of them already have licenses and have started issuing stablecoins. These institutions are more traditional and are not in the same circle as Web3 projects. They are more down-to-earth," said Xiong Wei, founder of Evervision, who moved to Singapore in May last year and built the Arweave Asia ecosystem.

"The landing situation in Singapore is actually very good." As early as May, StraitsX, a digital asset payment infrastructure, launched the Singapore dollar stablecoin XSGD on Hedra. In September, DCS Card Centre, a financial institution in Singapore with licenses for issuing credit and consumer cards, announced the launch of its payment token DCS Tokens (DUS). And just a few days ago, Grab, known as the Didi of Southeast Asia, launched a Web3 wallet based on the Polygon public chain, allowing users to store and manage digital assets.

In response to this demand, payment-related projects that support fiat currency deposits and withdrawals have become relatively popular. Many projects providing payment solutions were also present at the main venue of TOKEN2049.

In contrast, exchanges that rely on retail trading have encountered difficulties in "settling down" in Singapore. Binance withdrew its license application in Singapore at the end of 2021, and it was reported in March this year that it planned to reapply, but with a shift in focus from retail customers to enterprise clients.

"Cost is very important for Web3 projects. Centralized exchanges will definitely flow to countries with low costs, but for purely outsourced projects, compliance or non-compliance is the driving force. The direction of exchanges does not represent the development of Web3," Xiong Wei told Foresight News. "In fact, the Monetary Authority of Singapore cannot control these. Singapore only regulates what it has researched, and it does not touch anything it has not researched."

Competing for the capital of Web3? Singapore is not in a hurry

KPMG's Pulse of Fintech report for the first half of 2023 mentioned that as the United States tightens its scrutiny of the cryptocurrency industry, other jurisdictions (including Singapore and Japan) are becoming increasingly attractive to investors and startups. Singapore, in particular, is seen as a strong frontrunner, as it has already established relevant regulations, including the Payment Services Act and the Digital Token Payment Act, and is planning to issue regulations related to stablecoin issuance.

The report also mentioned that several jurisdictions in the Asia-Pacific region are striving to become global hubs for crypto assets. Singapore has already taken the lead in this area. In addition to Singapore, Japan and Hong Kong, China, have also taken a series of measures to establish strong crypto asset ecosystems.

Co-founder of the NFT market and aggregator Alienswap, Lan, told Foresight News that after leaving China last year, he stayed in Japan. After TOKEN2049, he decided to move to Singapore and is considering establishing a company there next year.

"When we first started going global, we considered Singapore, Hong Kong, and Japan. Although the cost of living in Japan is 30% lower than in Singapore, and the IT-related business is more open, the language barrier is a problem. On the other hand, the projects in Japan have not reformed, so everyone is coming to Singapore, where the communication cost is very low," Lan said. He is looking forward to being in Singapore.

"I found that after last year's conference, many investment institutions moved to Singapore, which I didn't expect. It's also because it's too bearish now. From 2021 to 2022, Singapore actually supported many startups, but the overall policies in Singapore this year are not as open as in 2022. However, VCs still receive support in Singapore, and there are policies that make it easier for them to handle procedures and establish companies locally. From what I understand, the cost of obtaining a license in Hong Kong is actually very high," Lan observed, noting that even in a bear market, Singapore still provides a lot of support.

In comparison to the regulatory requirements in Hong Kong and Singapore, several experienced practitioners told Foresight News that Hong Kong is stricter. "When we compare the custody requirements for the Singapore Payment Services License with the custody requirements for the Hong Kong Virtual Asset Trading Platform License, we find that the latter has relatively stricter regulations," said Liu Jia, founder of dtcpay.

Cobo provides white-label solutions for multiple companies applying for licenses in Hong Kong. COO Lily Z. King stated that in terms of the custody capabilities of exchanges and the ratio of hot and cold wallets, Hong Kong is indeed stricter than Singapore.

Xiong Wei has already settled in Singapore and is very optimistic about Singapore's regulatory path, especially compared to Hong Kong, which has opened retail trading. "Hong Kong is a bit hasty, with the authorities overly promoting it. If not careful, there may be some major loopholes," Evervision does not plan to expand its business in Hong Kong. "In the current situation of relatively low regulatory intensity, there are many speculative projects mixed in, even advertising on the streets."

Xiong Wei's concerns about Hong Kong are not unfounded.

On September 13, the exchange JPEX was exposed for laundering over 190 million USDT, and the Securities and Futures Commission (SFC) of Hong Kong specifically warned it for promoting services and products to the Hong Kong public without a license. JPEX also had a booth at TOKEN2049 this year. After the incident was exposed, JPEX immediately cleared the booth, staging an "on-site run."

In terms of business expansion, Hashkey Exchange, which obtained a license in Hong Kong, has very unsatisfactory retail business trading volume. "What I understand is that the KYC requirements are too strict," Xiong Wei said.

"Singapore and Hong Kong actually complement each other. If you want to empower the government and build infrastructure, you go to Singapore. If you want to develop retail cryptocurrency, you go to Hong Kong," said Li Guoquan. "The only competition between the two places is talent."

"But talent is also for stimulating consumption. In the past, Singapore needed to attract a lot of talent, but now it's already full. If it continues, housing prices and consumption will be too high. Hong Kong wants to attract up to 300,000 people, but no more. So there is no longer competition between Singapore and Hong Kong. There are already too many talents in Singapore. If a talent stays in Hong Kong for 6 months and in Singapore for 6 months, I think that's good."

"For companies that want to have a position internationally, they need to have a license in both Singapore and Hong Kong. I think the ultimate situation is that each region has its own local exchange, but each country only needs four or five, and the rest are decentralized exchanges and other Web3 projects that empower the government."

TOKEN2049 was a wild celebration, but Singapore "watched coldly from the sidelines"

TOKEN2049 is held once a year, and the crypto market has transitioned from a bull market to a deep bear market. Yet almost everyone is extremely confident that the next bull market will come with the halving of Bitcoin next year.

"Emotions were better last year, as the bull market had not ended long ago. This year, I invited some OGs from China, but none of them came. The internationalization of this year's event is better. This time, I also directly saw the maturity of European and American projects, which is completely different from the maturity of our Chinese projects," Xiong Wei felt the atmosphere was completely different at the Arweave ecosystem conference held at TOKEN2049 for two consecutive years.

Moreover, with the continuous regulatory actions by the SEC this year, more resources from Europe and the United States have shifted to Singapore, and the gap in projects is very apparent. "More European and American projects will attend meetings and talk about technology, while here, we mainly look at beautiful women," Xiong Wei sighed. "The difference is not small at all."

Although TOKEN2049 was crowded, there were not many actual transactions. Compared to last year, Xiong Wei told Foresight News that VCs are clearly more cautious this year. "Last year, many investment institutions like Tencent came, but after the FTX collapse, they completely withdrew from Web3. Now, traditional investment institutions are entering, but with a different group of people."

"Last year, we looked at 1,000 projects and only invested in 9. We couldn't get in," said Li Guoquan, who is not only a professor at Singapore Management University but also one of the founders of BlockAsset Ventures. "In 2017 and 2018, there were many projects in mainland China that were cutting leeks, but the projects in Singapore were very good, and the ideas were much better than they are now."

At TOKEN2049, the most unavoidable topic is compliance and regulation, and many project teams view concepts like RWA as the next hot spot to ignite the bear market.

"But I see many experienced practitioners starting to reject the noble spirit of Web3 itself—privacy protection. Everyone hopes to do compliance to attract more traffic and users. But this will make Web3 increasingly distant and centralized," Li Guoquan emphasized. "Satoshi Nakamoto's white paper was released in 2008, and 50% of it was about political economy. It was during the financial crisis, and Web3 was meant to change Wall Street, not become Wall Street."

"From last year to this year, it's clear that everyone is turning the crypto industry into another Wall Street. The entire financial market is already monopolized, but the essence of Web3 should not be a monopolized market," said Li Guoquan. While most project teams see compliance as a way out, Li Guoquan said, "Now we should cooperate with the government to empower them, but not to be regulated only by the authorities. These are two different things."

"The government is now regulating because they are disappointed in our industry, feeling that the industry lacks self-discipline and everyone is speculating. But even so, there are still many unregulated Web3 projects in Singapore. The Monetary Authority of Singapore says that we must innovate responsibly. Singapore's regulation has many aspects, and there are many projects in the sandbox that must be regulated. They also cooperate with us in the crypto circle. Last year, the Monetary Authority of Singapore went to Africa to help African countries with inclusive finance and education. These countries really need our crypto industry."

Professor Li Guoquan previously worked in the quantitative finance industry from 1993 to 2012, then returned to academia as a professor in 2012 until this year when he "re-entered the scene."

As for the reason, Li Guoquan said it was because he saw the combination of AI and blockchain and felt that the timing was truly maturing. Foresight News noticed that when Professor Li Guoquan was interviewed, the entire wall behind him was filled with books. "When we were young, we also wanted to use quantification, financial technology, and cryptocurrencies to make money. Having an entrepreneurial spirit is very good. But at the same time, don't forget that what you do should be beneficial to society, environmentally friendly, reduce speculation, increase trade, and solve political economy. But now I see many white papers and business models that are not sensitive to economic politics, they are only sensitive to regulation, which lowers the level a lot."

Li Guoquan also served as a member of the Financial Research Committee of the Monetary Authority of Singapore. He shared the stance of the Monetary Authority of Singapore at an event at SUSS this year, "We hope that Web3 is not used for speculation, but to solve the bottlenecks in human development, including in trade."

Regarding why the Monetary Authority of Singapore did not participate in TOKEN2049, Li Guoquan analyzed, "TOKEN2049 still misses the point of Web3. If it wants to become an event that is regulated, it must be beneficial to the environment, trade, or inclusive finance. We don't want to be a lower level, to be part of the regulated, but to bring blockchain technology to various places on an equal level. Only after TOKEN2049 or Web3 changes its speculative image can we see the appearance of regulatory agencies."

"In the future, there will be fewer and fewer speculators. Not everyone has to do compliance. 20% do compliance, 20% do anti-money laundering technology, 20% do inclusive finance, 20% do inclusive education, and 20% focus on projects that cooperate with the government. This is the truly innovative industry."

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