What are the vulnerabilities of Crypto in Singapore that can impact us in 2019?
Cryptocurrency at its core is essentially digital money. It is a means of exchange that use cryptography and blockchain technology to facilitate secure and anonymous transactions.
This requires a level of openness in the financial sector but what brings along with it is the greater susceptibility to its relevant risks and vulnerabilities. Just as an example, the Monetary Authority of Singapore (MAS) in May issued warnings to various digital token exchanges for facilitating the trading of such currencies without authorisation.
Singapore has since taken the lead in both blockchain and cryptocurrency in 2018. However, banks will still need to be made aware of not only the benefits but also the risks of such technologies. Only then will decision-makers be able to make conscious decisions whilst positioning their credit operations accurately.
What are these vulnerabilities?
In principle, cryptocurrencies have proven to be amongst the most cyber resilient innovations thus far with security as its top priority. However, there are often new entrants of cryptocurrencies with slightly lax cybersecurity standards.
As a result, it is clear that not all cryptocurrencies are created equally in term of their traceability, transaction ledgering and levels of trust or fiduciary responsibility. For this, there are risks as simple as “mysterious disappearances” of funds, and those as complex as ransomware attacks or AI-powered bots scouring the Internet for weak links. Such has made cryptocurrencies complex and fast-prone to perils.
Human error, although mostly a negated factor, can spell total loss of a crypto fortune. This can even include forgetting one’s password to access the system and being locked out. Losing access or hardware, or facing “geophysical risks,” will increase the risk of a loyal buyer’s remorse given the price volatility of cryptocurrencies.
According to Experian’s Managing Insider Risk Through Training and Culture Report, 66% of the data protection and privacy training professionals that were surveyed labelled their employees as the “weakest link” when attempting to safeguard their organisation from cyber threats.
Whether users are negligent, careless, or simply uninformed, implementing a perimeter defense is essential to protecting business-critical data and back-end systems from the risk of cyber threats.
Coupled with Crypto’s high-profile nature and high publicity, large asset holders will be at greater risk to physical security threats, such as kidnaping, ransom and extortion.
Lack of clarity on regulations
Overall there is a lack of coordination and clarity on regulatory, financial, tax and legal treatment. This is unsurprising given the relatively new nature of this market and the often slow moving and lagging quality of “regulatory catch up.” In fact, most regulators around the world did not begin to form an opinion about cryptocurrencies until Bitcoin’s rise to prominence in 2017.
As a result of such lack of awareness, incidents ranging from ransomware attacks such as WannaCry to massive data breaches have occurred through the years which have harmed the stability and security of financial systems across the globe. Like the global financial system, Singapore will need ample coordination and coherence which will go a long way in mitigating risks while improving overall market stability.
Will there be tighter regulations in Singapore?
Payment services in Singapore have changed dramatically as we continue to promote a cashless society. We are in the midst of another wave of change and crypto is overtaking the payments sector. To safeguard it from risks mentioned above, the MAS has released a bill. Below further explains the bill.
Payment Services Bill (PSB)
As explained by Singapore’s central bank:
The Payment Services Bill will provide a more conducive environment for innovation in payment services, whilst ensuring that risks across the payments value chain are mitigated.
In addition to payment service providers already under the current regulation, it’s been reported that cryptocurrency service providers who were previously outside of regulation can now expect to be licenced under the new Payment Services Bill.
Activities to be regulated by the bill include the issuing of accounts and electronic money, the transfer of money within and out of Singapore, the acquisition of merchants who will use their platform, money changing, and the dealing in and exchange of digital payment tokens such as Bitcoin.
Will Singapore remain attractive for foreign companies in crypto?
The city-state has built a reputation for itself as a forward-looking and adaptable financial hub in Asia. Compared to the rest of the world, regulators in Singapore are well-informed and are more transparent about their views on blockchain and cryptocurrency. As a country that most foreign companies will establish a presence in, Singapore has not only been the gateway for them to enter the Asia Pacific market, but it has now also become the go-to crypto sandbox of Asia.
While Singapore has already gained recognition for being the world’s second country to regulate Bitcoin, the city-state is determined to become the first crypto-friendly country. Just as an example, the CEO of imToken recently described Singapore as “friendly to blockchain technology”, after announcing plans to relocate to the country.
Upbit, South Korea’s largest exchange, will also establish itself in Singapore this year. Upbit is owned by Korean tech-giant Kakao Corp, and originally launched in the Korean market in mid-2017. The decision to expand into Singapore was heavily influenced by the country’s progressive cryptocurrency regulation, and its desire to establish a strong crypto and blockchain sector.
This positivity will remain as long as Singapore remains vigilant on the risks mentioned above in the coming year ahead. To keep up with this fast-changing market or would like to find out how this can potentially impact your organisation, do follow us on Linkedin or drop us an email at [email protected].