Binance intends to take another stab at securing a license to offer cryptocurrency services in Singapore, pivoting from retail to corporate clients, even as the digital assets giant comes under increasing scrutiny from U.S. regulators.
The world’s largest crypto exchange will have its custodial arm apply for a permit to offer such services “in due course,” according to executives from the unit.
With little fanfare, Binance at the end of November launched the revamped business for corporate customers from Singapore, rebranding Binance Custody as Ceffu. The exchange did not disclose the exact capital relationship with the unit.
The spinoff caters to professional investors looking for custodial and other digital asset services. It is for this business that the exchange wants to be licensed.
Jarek Jakubcek, head of law enforcement training at Binance, told Nikkei Asia his company has been ramping up capabilities to meet regulators’ demands.
“If you take a look at recent hirings, you will see that Binance is hiring people with years of experience in law enforcement and regulations,” he said.
In the year since it shut its Singapore platform to retail investors amid pressure from the local financial authority, the crypto giant has been offering services from the Asian financial hub to institutional clients.
“Given the city’s reputation in innovation, good corporate governance, and a strong regulatory framework, it’s no surprise that institutional investors are attracted to set up shop here,” Athena Yu, Ceffu’s vice president, told Nikkei.
Over in America, markets watchdogs last week opposed a proposal by Binance U.S. — a separate entity set up for the local market — to acquire the assets of bankrupt crypto lender Voyager Digital, noting that part of the rescue plan may violate local securities law.
Singapore has also presented challenges for the crypto giant. In 2021, Binance’s local unit dropped its bid for a domestic license from the Monetary Authority of Singapore (MAS), accompanied by an abrupt exit from direct retail services in the city-state. Local authorities have taken a tougher stance on crypto speculation activities within its borders.
That year, the MAS ordered the exchange to stop courting business from mom-and-pop investors in the country, after it solicited Singapore users without a permit. Binance is being investigated by the city-state’s white-collar crimes investigation unit on whether it had broken any rules.
In October 2022, the MAS published proposals seeking to expand its reach to safeguard consumer interests in the crypto space, a plan over which it sought feedback from industry players until December.
Nikkei understands that the regulator is reviewing that feedback and will publish a response. Observers expect months before any new rules in Singapore’s consumer-centric crypto framework will come into play.
The framework bars companies from lending out digital coins owned by retail customers, and requires client assets to be kept separate from company holdings.
In addition, the regulator mooted a ban on credit lines to fund cryptocurrency purchases, with digital asset firms also potentially required to administer assessments for retail investors before those clients can trade virtual tokens.
“The implementation of customers’ suitability assessment, restrictions against borrowing for trading digital payment tokens, will both impact and reduce activities,” said Desmond Yong, chief strategy officer at crypto payments firm Digital Treasures Center.
The draft of additional measures sets up a tighter operating environment for crypto companies in Singapore, which has already garnered a reputation for coming down hard on the emerging industry.
“I wouldn’t say these regulations would definitely prohibit companies from coming into Singapore,” said Yuankai Lin, partner at law firm RPC Premier Law. “We also need to bear in mind that Singapore is not the only country that is thinking of regulating crypto assets.”
Binance and other crypto firms Nikkei spoke to raised the issue of increased compliance expenses. “This is a very expensive process,” said Binance’s Jakubcek. “The investment for compliance is considerable.”
Ken Kodama, CEO of EMURGO, a provider of technology solutions for blockchain — the innovation underpinning cryptocurrencies — noted that the MAS is “well-intentioned” in seeking a balance between user and business interests, but the added scrutiny presents some hurdles.
“In the short term, it may hamper smaller crypto firms with fewer resources from establishing a solid foothold in Singapore due to higher administrative costs,” he said.
In December, Binance sent eight pages of feedback to the MAS concerning the regulator’s proposals for increased consumer protection, suggesting a handful of tweaks to the plan.
On the MAS’ idea to disallow players from lending out digital coins owned by retail customers, for instance, Binance mooted a calibrated approach to protect clients from the risks of unregulated leverage.
“Through appropriate regulation, including the use of disclosure and customer consent, it is feasible that simple, lower risk, saving and lending activities can be made available to retail consumers safely,” it said in the feedback.
The MAS also sought comments on whether crypto players should be required to appoint an independent custodian to hold on to customers’ assets, to which Binance said a bespoke approach may be needed.
“It may not always be operationally feasible and may in fact increase security risk where a third party custodian is required to hold customers’ assets,” the exchange said. “Binance proposes that, within regulatory guardrails, there should be flexibility to enable different risks to be managed appropriately.”
The extra safeguards that Singapore intends to put up have raised questions over whether the financial center will remain an attractive place for digital asset players, at a time when rival hubs like Hong Kong are seen to be luring investments from these players.
Binance appears to still value even a limited form of a commercial presence in the Southeast Asian country with its institutional business, given the spinoff unit’s determination to secure a license in a tougher regulatory environment.
The country is favored for its flexible tax policies, access to diverse tech talent, and its convenient location that allows companies to operate smoothly within the region in Asian time zones, according to Takashi Sato, CEO of Arriba Studio, a Singapore-based accelerator which invests in crypto firms.
“The ease of communicating and exchanging information with other Asian investors is a big plus,” said Sato, while noting that “as a finance hub with high standards, Singapore has always been a tougher place.”