Singapore’s swift action in suspending cryptocurrency exchange Bitget following the Army Coin scandal will help to establish its role as a global alt-coin centre, experts say.
Bitget’s suspension could help the local regulator to expand its powers in the cryptocurrency sector, according to Devesh Mamtani, chief market strategist at Century Financial in Dubai.
“Singapore will now continue pushing its regulations further into the crypto and digital wallet space,” Mr Mamtani said.
Followers of South Korea’s biggest boy band BTS were targeted by the Army Coin-based pension scheme, which claimed to offer “lifetime financial” support to the K-Pop band's loyal army of followers.
In October, the Hybe Corporation, BTS’s management team, threatened the Bitget platform with legal action over the claims. This was followed by the Monetary Authority of Singapore cancelling Bitget's licence, the Financial Times reported on Sunday.
Central banks around the world have been reluctant to endorse cryptocurrencies because of their speculative nature, lack of value and regulatory oversight. The Central Bank of the UAE also does not recognise cryptocurrencies as legal tender.
In September, China, the world’s second-largest economy, vowed to root out “illegal” activity in the trading of Bitcoin and other cryptocurrencies and banned overseas exchanges from providing services to mainland investors via the internet.
Bitget, which was founded in 2018, was forced to remove the Monetary Authority of Singapore's logo from its website, while Singapore users are blocked from accessing its app and website.
The cryptocurrency industry is “comforted” that the Singapore regulator is monitoring the market and steps have been taken to stamp out fraud, said Philippe Ghanem, founder and executive chairman of SquaredFinancial.
“I salute the intervention to protect retail investors, but we also need more transparency to reassure the public, Mr Ghanem said. “There is no place for false claims or hype in our industry and we want investors to be informed and confident in their choices.”
If Singapore acts swiftly, it could turn the recent scandal to its advantage, Mr Mamtani said. “The challenge posed by Army Coin and other newly launched cryptos has to be met if the industry is to build trust among investors. If it does, this will strengthen the regulatory process and reduce future frauds.”
The Army Coin scandal is the latest example of how the “Wild West of cryptos is turning riskier” and needs reining in, Mr Mamtani added.
Army Coin soared by 5,000 per cent on its first trading day, as BTS fans raced to buy the coin, he said. “This is not the first time Hybe has had to warn investors and fans about cryptocurrency scams using the names of the company, its affiliates or artists belonging to the agency.”
chief market strategist, Century Financial
“It follows last month’s launch of the ‘Squid coin’, which piggybacked on the smash hit Netflix series of the same name without permission.”
Squid coin hit a high of more than $2,860 before plummeting to nearly zero, with investors losing at least $3.3 million, Mr Mamtani said. “Its creators disappeared from social media, along with investors' money.”
The Singapore regulator’s crackdown on Bitget is both welcome and necessary, said Katharine Wooller, managing director at Dacxi. “Singapore seeks to be the global centre of crypto and needs to demonstrate a solid and fast-moving regulatory framework.”
Yet there is only so much regulators can do given the increasingly crowded cryptocurrency market, which now had more than 15,000 coins, she said. “These range from the credible to the frankly ridiculous. A market consolidation is long overdue and may come soon.”
Singapore has stolen a lead by being the first to suspend Bitget’s licence owing to the Army Coin scandal, Josh Sandhu, co-founder of Quantus Gallery, said. “I expect other territories to follow suit.”
Bitget, which is based in Singapore, had argued that it is only a trading platform and had nothing to do with the project, but Mr Sandhu said this is not strictly true. “Exchanges are businesses and it’s in their interests to list projects that will make money. Part of that is to list and promote coins on their exchange so that more money can flow into their ecosystem.”
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Bitcoin slid about 8 per cent to $40,237 in early Asian trading on September 21, 2021, dropping to its lowest level since the beginning of August. Reuters -
Vitalik Buterin, the co-founder of Ethereum, became the world's youngest crypto billionaire after Ether breached the $3,000 level in May this year. Bloomberg -
Tether, also known as USTD, is considered a stablecoin as it was designed to always be worth $1. Unsplash -
Cardano is growing in popularity with cryptocurrency investors after reaching a market cap of $77 billion in May this year. Unsplash -
Binance Coin is one of the biggest cryptocurrencies in the world. Alamy -
US technology company Ripple created the XRP cryptocurrency in 2012. Today, it is trading at about $0.94, according to Coinbase. Unsplash -
Solana, a programmable blockchain cryptocurrency, hit a record $80.12 in August. Bloomberg -
The USD Coin is a stablecoin with about $27 billion worth of coins in global circulation. Unsplash -
The Polkadot cryptocurrency is built on a multi-blockchain network and has a market cap of about $28.8 billion. Alamy -
Originally designed as a meme joke in 2013, Dogecoin today trades for about $0.21 and has a market capitalisation of about $27.6 billion. Getty Images
Bitget may not be a part of the development team, but when it runs ads promoting and echoing some of the language used by Army Coin and using the band’s image, that creates a problem, according to Mr Sandhu.
With no regulating body, it is easy for cryptocurrency issuers to bend rules and “fly too close to the sun”, Mr Sandhu added.
Singapore may have aspirations to become a global crypto centre, but Bitget highlights the challenges that involves, said Laith Khalaf, head of investment analysis at AJ Bell.
Suspending Bitget is part of a concerted move by Singapore's regulator to take back control. “Regulators across the globe are taking action on the crypto industry to ensure it doesn’t do widespread consumer damage, and to limit its appeal as a route for money launderers to clean their money.”
Mr Khalaf added: “While Singapore may have ambitions towards encouraging crypto activities, it will want to do this in a responsible manner”.
managing director, Dacxi
The Bitget case is just another unfortunate example of how the crypto moneymaking machine attracts “bad actors”, said Iustina Faraon, co-founder of Coreto. “Everything is moving too fast. A week in the real world is the equivalent of a day in crypto.”
The market is beset with “artificial hype, aggressive marketing campaigns, fake news and corrupted influencers” she said.
Scams and false claims are destroying investor trust and threaten the market. “The decentralised aspect of the technology makes it attractive but at the same time confusing,” Ms Faraon said.
Investing in cryptocurrencies is always speculative but especially now, with US Federal Reserve chairman Jerome Powell ready to tighten monetary policy to curb inflation, Mr Mamtani said. “Tapering could now burst the crypto bubble, while if the Omicron variant continues to spread that may also have investors running for the hills.”
The Christmas holidays may bring further short-term challenges as investors wind up their holdings to lock in this year’s gains, Mr Mamtani said. “They remain vulnerable to fads and scams, making them more prickly than ever.”
