First Mover Asia: Singapore's Strict Approach to Crypto; Bitcoin Rises Despite Investors' Jitters About War, US Executive Order

·11-min read

Good morning. Here’s what’s happening:

Prices: Bitcoin and ether rose slightly but investors nervously awaited the next turn in Ukraine and a long-awaited crypto executive order by U.S. President Joe Biden

Insights: Singapore's strict approach to crypto may be deterring some companies in the industry from establishing a presence there.

Technician's take: Narrow price zones could benefit short-term BTC trades. Support at $37K; resistance at $43K-$45K

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Prices

Bitcoin (BTC): $38,673 +0.9%

Ether (ETH): $2,574 +2.6%

Top Gainers

Asset

Ticker

Returns

Sector

Bitcoin Cash

BCH

+2.8%

Currency

Ethereum

ETH

+2.7%

Smart Contract Platform

Polkadot

DOT

+2.6%

Smart Contract Platform

Top Losers

Asset

Ticker

Returns

Sector

Cosmos

ATOM

−3.3%

Smart Contract Platform

Dogecoin

DOGE

−0.8%

Currency

XRP

XRP

−0.7%

Currency

Bitcoin was up slightly on Tuesday amid another day of horror and tumult in Ukraine, and economic angst in the world beyond. Jittery investors also awaited a long-awaited crypto executive order on Wednesday by U.S. President Joe Biden that will outline the country's approach to regulation.

Yet at the time of publication, bitcoin (BTC) was trading at about $38,600, up slightly over the previous 24 hours. Ether (ETH) was changing hands at a little under $2,600, a roughly 2.5% gain over the same period. Other major altcoins were a mixed bag.

"Bitcoin is higher on the day as risk appetite showed signs of life after U.S. stocks had the worst rout in a few years," wrote Oanda Americas Senior Markets Analyst Edward Moya in an email.

Russia continued its campaign to isolate Ukraine's major Black Sea ports to the south and lay siege to its major cities, bombarding military and, increasingly, civilian targets. More than two million Ukrainians have fled their devastated country. Ukraine President Volodymyr Zelensky vowed to "fight to the end, at sea, in the air," echoing Winston Churchill, Britain's prime minister during World War II, in an emotional video address.

The U.S., European and other countries, which have condemned the unprovoked invasion, continued to ratchet up economic pressure on Russia. Biden announced the U.S. would ban the importing of Russian oil. The price of Brent crude has soared to $130 a barrel, sending energy prices higher worldwide. The price of a gallon of gas in the U.S. reached an average $4.17 per gallon, an all-time high.

Meanwhile, a new round of major international brands, including McDonald's (MCD) and Coca-Cola (KO) said they were pausing operations in Russia. The latest events and the Biden Administration's expected crypto executive order contributed to investors' fears.

Moya noted that "bitcoin’s fundamentals are still sound, but many active traders are putting the crypto trade on hold and focusing on a handful of commodity supercycle trades." He added: "Bitcoin is forming a trading range and over the next few weeks it could trade between the $35,000 and $45,000 trading range."

Markets

S&P 500: 4,170 -.7%

DJIA: 32,632 -.5%

Nasdaq: 12,795 -.2%

Gold: $2,052 +2.7%

Insights

What’s the Point of Singapore’s Digital Payment Token License if it's Too Hard to Get?

Three years ago Arthur Hayes (jokingly) bragged during a debate that his BitMEX crypto exchange was in Seychelles because regulators could be bribed with a coconut.

Hayes was trying to irritate his cantankerous debate opponent on stage while colorfully illustrating that there were alternative regulators to those in New York.

Nobody liked that comment, from regulators in the Seychellian capital to the U.S. Department of Justice, and the phrase eventually ended up quoted in the indictment against Hayes.

But in 2022 New York’s hardly the only regulatory body because other financial capitals vie to attract the crypto industry.

Singapore is often referred to as the next crypto hub in Asia, particularly because of its reputation for spotless governance and a strict rule of law.

Its strongman founder, Lee Kuan Yew, saw the nation’s path to prosperity as one of good governance and honesty. Unlike its neighbors, the government isn’t run by kleptocrats: Its civil servants are paid well for their competency, police don’t take bribes and the tap water is drinkable.

As much as Seychelles’ regulator might have honest intent and be run by sharp people, the perception of the country among some people is that it's the Third World.

So when Singapore’s Monetary Authority, its all-in-one regulator and central bank, started building a comprehensive crypto framework called the Digital Payment Token license, the industry was excited.

There’s no reason to keep ourselves parked in places with a less-than-stellar reputation, the industry thought. Let’s all move to Singapore.

From the Third World to First, but for the crypto era.

Since the doors opened for applications in early 2020, 180 firms applied for a DPT license. But 30 applications have been withdrawn, including Binance’s, and two were outright rejected.

That’s quite the sharp funnel, especially for a maturing asset class.

It’s 2022, not 2012. Crypto is young compared with other asset classes, but it has moved rapidly.

“Singapore’s standard is very high, and they will ask you to impose travel rules on your platform,” Patrick Chiu, the founder of Hong Kong’s AP Capital, a fund with a growing digital asset portfolio, told CoinDesk.

Travel rules involve strict anti-money laundering (AML) requirements on incoming and outgoing funds.

Chiu said the license terms have terms and stipulations that “aren’t typical for global exchanges.”

Everyone was welcome to apply, said Chiu. But there’s a tall regulatory wall.

So far only four firms have been approved for a DPT license with a fifth receiving approval-in-principle.

Included in the list is DBS (which counts Singapore’s sovereign wealth fund as its largest shareholder), which opened an accredited-investor-only trading desk in early 2021.

But absent are the usual stalwart names in crypto. Sure, there’s a lot to say about Binance dropping out given its baggage. But what about Coinbase (COIN)?

Chiu thinks the high license requirements may be deterring many of the usual names in crypto because of how unusual the requirements are for crypto.

For example, the license prefers face-to-face know your customer (KYC) vetting, Chiu said. Not really practical for many firms. There’s also the requirement that the crypto only stays within a network of whitelisted wallets within Singapore. Given the size of the market, this would no doubt hamper liquidity.

Bringing in foreign capital is possible, but because of the reporting requirements it’s just not realistic, especially for crypto traders that expect speed and liquidity that isn’t matched in any other asset class.

After all, DBS is only now planning to offer its small pool of crypto traders the ability to buy crypto online. Before, they needed to call in their orders. The bank is planning to offer a retail product by the end of this year at the earliest.

The question is, what kind of trader are these rules hoping to attract? It looks like a buy-and-HODL type.

As it stands there’s a pathway for people to buy and hold crypto under the licensing scheme, and that’s about it. Institutions might take an interest in this to add it to their balance sheet, but it's unlikely that professional traders or degens will be very interested.

By all accounts licensed decentralized finance (DeFi) is going to be impossible if the digital assets can’t leave the whitelisted wallets.

All of this sure sounds antithetical to crypto’s very fundamentals.

Sure, regulated crypto in Singapore will be as spotless as the country’s governance. But if the assets are stuck in Singapore, will anybody care?

Technician's take

Bitcoin Approaches $40K; Resistance at $43K-$45K

Bitcoin four-hour chart shows support/resistance (Damanick Dantes/CoinDesk, TradingView)
Bitcoin four-hour chart shows support/resistance (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) has held support at $37,000 over the past few days, which could yield short-term upside targets toward the $40,000-$45,000 resistance zone. Support refers to the price level where a downtrend can be expected to pause because of a concentration of demand or buying interest.

The cryptocurrency recently traded around $38,700 and is up about 3% over the past 24 hours. A decisive break above $40,000 could encourage additional buying into the Asia trading day.

For now, narrow price zones could benefit short-term positioning among traders as most technical indicators are neutral.

A counter-trend exhaustion signal on the daily bitcoin chart, per the DeMARK indicators, appeared on Monday. That could point to short-term stabilization in price, although the previous signal on Dec. 29 did not result in a price bounce.

At times, when confirmed, reversal signals could be helpful for brief trades. For example, there was a technical set-up for a price reversal on Jan. 24, which preceded a 30% price rally. In a bear market, however, price swings tend to fade within the direction of the prevailing downtrend.

BTC will need to hold above $37,000 support and break through the $46,700 resistance level in order to signal a trend reversal.

Important events

9:30 a.m. HKT/SGT(1:30 a.m. UTC): China consumer price index (Feb. MoM/YoY)

9:30 a.m. HKT/SGT(1:30 a.m. UTC): China producer price index (Feb. YoY)

Japan machine tools orders (Feb. YoY)

4 p.m. HKT/SGT (8 a.m. UTC): Speech by Guy Debelle, Reserve Bank of Australia assistant governor (financial markets)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Ukraine’s Digital Battle Against Russia, Role of China’s Digital Yuan in Russia Sanctions, an NFT Collection to Highlight Female Role Models

"First Mover" hosts spoke with Ukraine Ministry of Digital Transformation Deputy Minister Alex Bornyakov as the United Nations records about two million refugees have left Ukraine as Russia's assault continues. Darrell Duffie of the Stanford Institute for Economic Policy Research weighed in on the role of China's digital yuan in Russia sanctions. Crypto exchange OKX Director Adrian Yang provided market insights. Plus, celebrating International Women's Day, Lisa Mayer, Boss Beauties founder and CEO, shared how her company is helping bring female empowerment to the community.

Headlines

Thailand Eases Tax Rules on Digital Assets Until 2023: Crypto traders on government-approved exchanges will be exempt from a 7% value added tax (VAT), the country's finance minister said at a cabinet meeting.

Bitcoin Mining Startup Blockmetrix Raises $43M in Series B Round: The company had previously raised $7 million that went into deploying more than 1,000 mining rigs.

Bain Capital Launches $560M Crypto Fund: The $155 billion investment giant will focus on DeFi and Web 3 and isn't afraid to get its hands dirty with liquid tokens.

Ukrainian Boxer Wladimir Klitschko Releases NFT Collection to Support Relief Effort: All proceeds will be donated to the Ukraine Red Cross and UNICEF as Russia’s invasion continues.

Avalanche Commits 4M AVAX to Attract Gaming, DeFi and NFTs ‘Subnets’: The $290 million incentive fund is looking to help institutions and blue-chip projects “migrate” to the speedy, EVM-compatible blockchain.

Longer reads

Virtual Beers and Digital Orgasms: Welcome to the Age of Metaverse Commerce: Executives from Adidas, Budweiser, Clinique, NARS Cosmetics and other big consumer brands explain why the metaverse is “seismic” for their businesses.

Today's crypto explainer: Rarible NFT Marketplace: How to Get Started

Other voices: Reality Intrudes on a Utopian Crypto Vision (The New York Times)

Said and heard

No one wants dollars so they don’t command any interest. But the reverse is true for stablecoins. Demand for stablecoins constantly exceeds supply. So people with stablecoins to lend can charge premium interest rates, and crypto platforms desperate for stablecoins offer high interest rates to attract new stablecoin lenders. That’s why stablecoin interest rates are so high. It’s simple economics. (CoinDesk columnist Frances Coppola) ... While the decision not to remove [Brantly] Millegan from the ENS Foundation seems democratic, it’s important to remember how exactly voting power was initially distributed this past fall. Thanks to the lopsided distribution and delegation of tokens, Millegan has always had outsize power over this ecosystem. (CoinDesk columnist Will Gottsegen) ... "Russian oil makes up a small proportion of the crude that the U.S. imports. The U.S. gets most of its crude imports from Canada, Mexico and Saudi Arabia." (The Wall Street Journal)