Singapore’s attempt at crypto regulation may not work out, given its skeptical approach to the asset class, Ethereum co-founder Vitalik Buterin, said in an interview with The Straits Times on Nov. 20.
The city-state’s “willingness to make a distinction between blockchain usage and cryptocurrency is like one of those weird things,” he said. “The reality is if you don’t have cryptocurrency, blockchains that you’re going to have are just fake and nobody’s going to care about them.”
Buterin also mentioned that he appreciates the city-state’s willingness to be supportive, but it could all be for nothing.
“I definitely appreciate the amount of effort that they have been putting into it, and just their willingness to explore many different kinds of applications and be supportive.”
In fact, Singapore is seeking to cut down on retail-investor access to crypto trading to reduce risks to consumers from the market’s volatility. Last month, it unveiled proposals to restrict consumers’ participation in digital assets, including banning small investors from borrowing to fund coin purchases.
This being said, regulators around the world want to support new and emerging technologies, but also find cryptocurrencies “weird and scary”, he said.
This lack of understanding and fear of crypto pushes regulators to treat blockchain as a separate technology from crypto, which is definitely the case in Singapore.
Unfortunately, India is trying to adopt a similar approach, while some Chinese regulators have already attempted deploying blockchains that don’t use cryptocurrencies.
Nevertheless, Buterin said there’s a “tight connection” between blockchain and crypto, where one cannot exist without the other.
He explained, “I think some of the regulators in China definitely sort of tried to have one without the other and the reality is, if you don’t have cryptocurrency, then the blockchains that you’re going to have are just fake and nobody’s going to care about them.”
Singapore regulators are just trying to “discourage cryptocurrency speculation” without banning crypto outright, Buterin said. Although Singapore had earlier positioned itself as a crypto-friendly jurisdiction, it has started tightening regulations over recent months.
According to Cryptoslate, Buterin acknowledged that it could be “tough” for countries and regulators to reach a healthy balance between supporting new technologies without becoming a hotspot for bad crypto actors. But, when it comes to balancing crypto regulation, “there’s good ways to do it, and there are bad ways to do it,” he said.
After China’s crypto ban, many crypto firms fled to more friendly jurisdictions like Singapore. But, the “biggest risk of being friendly” is that the countries end up attracting people like Terra co-founder Do Kwon, who is being investigated for fraud in the aftermath of the Terra-LUNA collapse, Buterin said.
Do Kwon spent considerable time in Singapore, according to Cryptoslate, and many individuals connected with the Terra-LUNA collapse. Buterin added:
“It’s definitely true that if a country is not smart about crypto regulations, they can easily end up being stuck as the base for all of the Do Kwon people. And that’s not necessarily something that a country would want. But on the other hand, I think it’s definitely possible to engage productively and get a lot of benefits.”
There is no doubt that regulators must unite and kick start their regulatory work, especially after the latest market crash and poor conditions, as the crypto and blockchain space is in desperate need of some clear and strict regulations. However, dividing blockchain and crypto does no seem like a logical idea, as they are both intertwined and compliment each other. This is why, regulators must truly dive deep into this space and learn about the technology and its technicalities before coming up with any regulations or decisions that might negatively impact this industry for no logical reason.