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​Digital tokens back in spotlight as bitcoin soars

Published on: 07-Nov-2019

Cryptocurrencies are back in the spotlight after having lost much of their shine since 2017, when the value of bitcoin hit an all-time high of nearly US$20,000 (S$27,173).

Hype last month over Beijing's support for blockchain technology and Facebook's upcoming move into financial services with its proposed Libra currency have refreshed interest in the token economy.

The price of the world's most valuable cryptocurrency, bitcoin, which is based on blockchain technology, jumped on the back of the news. One bitcoin was worth US$9,384 yesterday, more than double its US$3,804 price at the start of the year, according to tracker platform CoinMarketCap.com.

As the sector hots up, what its next steps should be will be addressed by industry players at the Singapore Fintech Festival x Singapore Week of Innovation & TeCHnology next week.

Speakers for the talk titled "Defining the Future of Digital Currency" include director-general Mu Changchun of the Institute of Digital Currency at the People's Bank of China and Libra's co-creator Christian Catalini.

The token economy, which cryptocurrencies are a part of, has also taken root in Singapore, businesses and academics told The Straits Times, adding that the budding sector needs more regulatory clarity to support its growth.

Another priority is outreach, they said, and investors need to learn how to protect themselves better.

Cryptocurrencies are not regulated by the Monetary Authority of Singapore (MAS) as they are not legal tender.

Highlighting how there were at least five breaches around the world last year that resulted in the loss of some US$856 million, Associate Professor Lawrence Loh of the National University of Singapore Business School said there is a rising need for stronger defences against hacks and theft in the virtual currency realm.

The private sector has stepped in to fill the gap.

Singapore Blockchain Association chairman Chia Hock Lai has also observed more institutional investment in cryptocurrency. "Ancillary services such as crypto custody are also seeing more growth," he said, referring to companies that store and protect their clients' digital assets, among other services.

An example is United States financial services giant Fidelity Investments, which announced last month that it will be rolling out its cryptocurrency custody business, Mr Chia said.

The move lends legitimacy to the growing sector, he added, saying: "Fidelity is a big name that institutions, especially the big ones, will readily trust."

A report by Allied Market Research predicts that the digital asset management sector will grow to US$5.3 billion by 2023, a 180 per cent jump from US$1.9 billion in 2016.

Mr El Lee, co-founder and chief operating officer of Onchain Custodian in Singapore, said that the digital asset custodian business has become more competitive, as the number of players jumped from about five in 2017 to more than 20 globally over the past two years.

Onchain Custodian was registered in July last year.

Exchanges are also being set up as marketplaces where investors can keep tabs on the price fluctuations of cryptocurrencies.

Chief executive Branson Lee of ECXX Global, which runs a digital asset exchange, said that more can be done to protect retail investors here, as not all overseas exchanges have strict requirements for listings.

ECXX Global was registered in October last year.

Prof Loh has been conducting public talks to raise awareness about the token economy. Investors need to carefully study the cryptocurrencies they want to invest in, he said.

One popular misconception, he added, is that cryptocurrencies can only be awarded through mining, an industry that has sprouted because of bitcoin's popularity.

But bitcoin is just one form of cryptocurrency, he added, pointing out that there are more than 3,000 types of cryptocurrencies in the market.

Nanyang Business School senior lecturer Li Yan said that tokens can be designed to be used for payment while others are backed by assets.

Users may receive tokens when they use a certain provider's services, he added. For example, users who are on peer-to-peer sharing site BitTorrent may be rewarded with Tron tokens for helping to send files.

Mr Chia, Mr El Lee, Mr Branson Lee and MakerDAO's community lead for Asia-Pacific Jocelyn Chang called for greater clarity on the regulation of digital tokens in Singapore.

Mr Chia noted that utility tokens - which are a form of digital token - remain largely unregulated, and the Singapore Blockchain Association is hoping that MAS will encourage the industry to self-regulate such tokens.

Utility tokens can be used to purchase products or services offered by the companies that issued them.

Parliament passed a new law in January that will put more payment services, such as digital payment tokens and merchant acquisition, under the ambit of the MAS. This will come under the Payment Services Act, which will take effect early next year.

Ms Chang said that Singapore's regulations are the most advanced in Asia. Speed remains key, she added. "The current challenge is the lack of clarity around crypto regulation, and regulators are not moving as fast as the blockchain companies."


Source: The Straits Times, 7 November 2019

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