Could Singapore emerge as the next spot BTC ETF hotspot?

Is Bitcoin’s popularity surging in Singapore following U.S. approvals? What insights does a recent study offer into Singaporeans’ interest in Bitcoin ETFs?

Singaporeans are increasingly warming up to Bitcoin (BTC), and recent developments in the U.S. have played a big role. 

According to the latest study by Independent Reserve, a Singaporean crypto exchange, Bitcoin has captured the attention of 39% of the population following the approval of spot Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC).

Lasanka Perera, CEO of Independent Reserve Singapore, attributes the surge in Bitcoin demand to institutional investments catalyzed by the approval of spot Bitcoin ETFs. He said:

The long-awaited arrival of the spot Bitcoin ETFs has supercharged the demand side for Bitcoin as billions of dollars from institutions has poured in. The trust and understanding of Bitcoin have grown significantly over the past few years, and more Singaporeans are increasing their allocations.

Lasanka Perera, CEO of Independent Reserve Singapore

Meanwhile, awareness is high, with 51% of Singaporeans knowing about the SEC’s approval of spot Bitcoin ETFs. Moreover, 33% are considering investing through overseas offerings due to the absence of such products for retail investors in Singapore.

Meanwhile, as the Bitcoin halving event approaches in April, 48% of crypto investors in Singapore plan to increase their Bitcoin holdings over the next year. Particularly noteworthy is the intention of 68% of investors holding over 50% of their portfolios in crypto to increase their Bitcoin positions.

The study also reveals the sophistication of Singaporean investors, with 52% having more than three years of market experience and holding increasingly diverse portfolios. 

Additionally, 52% prioritize portfolio diversification, indicating growing confidence in cryptocurrency as an alternative asset class.

However, 75% of Singaporeans prefer direct investment in Bitcoin through crypto exchanges rather than through ETFs due to lower fees and a wider range of trading options.

Regulatory environment and crypto adoption in Singapore

In Jan. 2024, the Monetary Authority of Singapore (MAS) issued caution against retail investors in the country considering spot Bitcoin ETFs in international markets. 

MAS emphasizes that despite the recent approval of such funds in the U.S., spot Bitcoin ETFs have not been approved as eligible assets for collective investment schemes (CIS).

MAS also implemented new rules in Nov. 2023 to safeguard retail crypto investors, restricting businesses from offering incentives like free tokens upon signup. The regulator aims to prevent such incentives from impairing customers’ judgment when using crypto services. 

Additionally, businesses cannot offer margin/leverage transactions and cannot accept locally issued credit cards to reduce easy access to debt financing.

Despite regulatory efforts, Singapore is witnessing a rise in crypto use cases. 

Grab, a prominent super app, now allows users in Singapore to make payments using cryptocurrencies like Bitcoin, Ethereum, and others. 

This development, facilitated by Grab’s crypto payments partner, Triple-A, signals a growing acceptance of crypto as a legitimate means of payment for everyday services, ranging from ride-hailing to food delivery.

Furthermore, cryptocurrency exchanges in Singapore are gaining regulatory approval, indicating the city-state’s emergence as a crypto hub in Asia. 

OKX’s Singapore subsidiary has received in-principle approval for a payments license, enabling it to provide digital payment token and cross-border money transfer services. 

Upbit, another major exchange, has secured a full license, affirming its commitment to serving both retail and institutional clients in Singapore’s thriving digital ecosystem.

Singapore’s forward leap into tokenization, staking and DeFi

In a stride towards embracing crypto, MAS in Jun. 2023 unveiled its stance on integrating decentralized finance (DeFi) and asset tokenization into established financial structures. 

The release of the document titled ‘Project Guardian: Enabling Open & Interoperable Networks’ delves into the vast potential of DeFi and explores methods to digitize tangible assets. 

Trials conducted by financial giants like HSBC, Marketnode, UOB, and UBS Asset Management showcased enhanced customization, broader distribution, and reduced trading time and costs.

Meanwhile, in a separate development, a Feb. 2024 study by Seedly and Coinbase reveals Singaporeans’ increasing engagement with staking services. 

Approximately 55% of respondents reported using staking services through centralized exchanges, while 38% utilized DeFi applications. 

This trend reflects optimism about the long-term potential of crypto, with 56% believing it to be the future of finance. 

Could Singapore become the next spot BTC ETF hub?

Singapore’s crypto investment practices reflect its position towards becoming a leading fintech hub in Asia. 

Clear regulations, notably through the Payment Services Act of 2019, provide a secure environment for crypto projects, ensuring investor protection and market integrity. 

Meanwhile, government initiatives, such as blockchain pilot projects and exemption periods for digital payment token services, further support the ecosystem, helping businesses adapt to regulatory changes seamlessly.

Despite some setbacks, like the collapse of local crypto projects such as Terraform Labs and Three Arrows Capital, Singapore remains an attractive destination for crypto endeavors. 

Moreover, strong digital infrastructure, ease of doing business, and no capital gains tax make it appealing to crypto investors and startups. Simultaneously, access to venture capital and government support further attracts investment, creating fertile ground for startups. 

In late 2023, Singapore emerged as a significant destination for blockchain and crypto venture capital funding, attracting over 11% of global investments. 

Analysts attribute this surge to various factors, including the collapse of the FTX crypto exchange and subsequent revaluation by U.S.-based crypto companies.

Additionally, Singapore’s reputation as a hub for Web3 developer talent, driven by initiatives like the Smart Nation Initiative, strengthens its status as a tech innovator hub.

Hence, the premise of spot BTC ETFs in Singapore shows promise. While Singaporean investors currently prefer direct crypto investments, the introduction of crypto ETFs could broaden access to digital assets, appealing to a wider investor base. 

As regulations evolve, with a focus on balancing innovation and investor protection, Singapore could become a premier destination for crypto ETFs, uplifting its position as a financial and crypto hub in Asia.