Singapore.. A crypto paradise marred by world-famous crashes

International searches for Do Kwon, co-founder of previously announced collapsed cryptocurrency firm Terraform Labs, have put the spotlight on Singapore, whose reputation has taken a hit after the collapse of a number of digital asset funds with connections in the city-state.
Not only was the kwon company, whose terra-dollar collapsed in May, was registered in Singapore, Korean prosecutors believe he traveled to the city-state in April.
Last week, Kwon showed his position on Twitter in Singapore, writing in a tweet that he was making “no effort” to hide. Singapore police said Kwon is not in the city-state.
The Kwon case isn’t the only high-profile crypto-controversial case to be discovered in Singapore, and until recently it was presenting itself as a friendly destination for digital assets in competition with its global rivals, Dubai and Zurich.
A long list of scandals and meltdowns has tarnished Singapore’s reputation after officials touted its stability, tight regulation and tax suitability as an advantage for crypto companies and investors, executives and crypto experts said.
“The damage to its reputation over the past six months is much more serious than it used to be,” said Kelvin Low, professor of law at the National University of Singapore. “Every time one of these companies appears, it is mentioned as being based in Singapore.”
Some of the biggest crypto crashes can be traced across Singapore, which has attracted digital asset firms from around the world.
“Singapore has the most liberal regulatory environment after Switzerland when it comes to investing in cryptocurrency,” said Kim Hyung-jung, head of the Cryptocurrency Research Center at Korea University.
“Cryptocurrency market participants prefer to work in Singapore because of the transparent regulations, and their easy access to investors for funding,” Kim added.
Three Arrows Capital, a cryptocurrency hedge fund that collapsed in June, started as a Singapore-listed fund manager.
Later, management of the company’s sole fund was transferred to an offshore entity in the British Virgin Islands. Co-founders Sue Chu and Kyle Davis have not disclosed their location since the bankruptcy of Three Arrows.
The regulator in Singapore has formally reprimanded Three Arrows for providing false information and violating certain asset management limits. It added that it was assessing whether other regulatory violations had occurred.
Headnote, a Singapore-based crypto-lending platform that received initial approval for a license from the Monetary Authority of Singapore, halted withdrawals and laid off the majority of its staff earlier this year.
In August, Huddlenot was placed under temporary judicial administration. The company said that this decision “will provide a better opportunity for recovery.” Singapore police said they were “investigating” the Huddlenot case.
Singapore police did not investigate the terra dollar collapse despite filing a complaint, according to local media. It also did not respond to a request for comment regarding Terraform Labs and the Kwon case.
The Monetary Authority of Singapore said that “none of these distressed firms have been licensed by the Monetary Authority of Singapore” under its Payment Services Act, which regulates payment systems, and is therefore not under its jurisdiction.
It reported that Three Arrows Capital “discontinued managing funds in Singapore before the problems that led to its bankruptcy”. It added that Huddlenot had withdrawn its license application, so “the suspension of services does not violate” Singapore regulations.
“In Singapore, as in all other jurisdictions, not all cryptocurrency-related activities are subject to regulation,” the Monetary Authority of Singapore said, adding that “its sophisticated regulatory approach makes Singapore one of the most comprehensive in digital asset risk management.”
With the onset of the crypto crisis, regulators in Singapore proceeded to take a tougher stance, with officials promising to be “tougher” about bad behavior in the sector.
But experts said Singapore was not doing enough to punish or investigate potential fraud, as the digital asset industry crisis has swept through, causing a torrent of losses for retail investors.
“I think there is a limit to Singapore’s willingness to say one thing and do something completely different,” said an executive at a cryptocurrency firm active in Singapore.
The same executive stated that he believed Singapore was in an “awkward position” in trying to strike a balance between viewing it as a “key player in the global economy” and “trying to promote itself as an innovation hub in an emerging industry that clearly shows that it has a growing number of Bad parties.
In August, Ravi Menon, managing director of the Monetary Authority of Singapore, distanced the regulator from the scandals and said it would take “further measures to limit consumer harm”.
Most of the steps were preventive measures to protect individual Singaporean investors, such as cracking down on ads, rather than disciplinary action.
The shifting tone from officials, including Menon, has caused some crypto firms to re-evaluate their operations in Singapore.
Binance, the world’s largest cryptocurrency exchange, has abandoned its plans to make the city a hub for the cryptocurrency market even though its CEO, Zhang Bing Zhao, is living there most of the time in 2021. Last year, the Monetary Authority of Singapore also put the platform on a warning list. Investors from unlicensed entities.
“Singapore is not of much interest to us,” said Gleb Kostarev, regional head of Asia at Binance. “A lot depends on regulation (…) Previously Singapore was like a crypto-currency paradise (…) Times have changed.”
Others have come to defend Singapore’s status as a cryptocurrency hub, demonstrating that blaming the city-state is unfair.
One person familiar with the matter said, “I find that trying to put all the burden and responsibility on regulators is somewhat unfair as well, while in many cases the responsible party is mostly participants in the crypto markets who frankly, in many cases, should to think better.”
Teresa Judy Gillen, a partner at US law firm Baker Hostetler, said the INTERPOL Red Notice list for Kwon was “unlikely to have an impact in the interests of the legality of companies set up or operating in Singapore”.
It added that the cryptocurrency industry “does not appear to be responding negatively to legal authorities’ investigation of allegations of criminal activity, fraud, and the like.”
ChainUp, a blockchain company that provides technology to cryptocurrency exchanges and other clients, said it is expanding into Singapore.
The startup moved its headquarters from China to Singapore in 2019, because Beijing was signaling at the time that it was clamping down on the sector.
“I am confident in the regulators’ approach,” said Sailor Chung, CEO of ChainUp.
He added, “No country can surround everything and it is difficult for the Singapore government to impose the rule of law on companies that have operations abroad.”

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