With their more favorable regulatory regimes and licensing frameworks, Singapore and Hong Kong are quickly becoming hubs for blockchain startups on a global scale.
This year, 11% of all VC investment in cryptocurrency and blockchain specialists went to companies based there, according to PitchBook data—compared to just 2% of total deal value during crypto’s 2021 bull run.
The collapse of FTX and an ensuing bankruptcy domino effect had a particularly chilling impact on investment in the US, where the share of global deal flow dropped from 53% to 37% between 2022 and 2023. Major players like Binance and Gemini have fallen afoul of regulators, and federal policy remains uncertain. In response, many cryptocurrency companies have scaled back their US ambitions and even taken respite in crypto havens overseas.
“When you look at the Hong Kong government and how they’ve been supportive of web3 and crypto and leveraging that technology, that resulted in a bunch of companies shifting their headquarters to Hong Kong and operating out of there,” said Bryan Chow, partner at web3 VC investor Side Door Ventures.
Mainland China’s ban on cryptocurrency trading, implemented in September 2021, presented a market opportunity for Singapore and Hong Kong to position themselves on the cutting edge of decentralized finance, further propelling this deal redirection.
In August, Hong Kong issued its first licenses for retail customers to trade bitcoin and ether, as part of a bid to revamp its reputation as a dynamic and modern global financial hub following years of strict pandemic lockdowns and widely-protested curbs to democratic freedom.
In October, leading cryptocurrency exchange Coinbase was awarded a full trading license by the Monetary Authority of Singapore, joining the ranks of 13 firms including Revolut and Blockchain.com. Even the collapse of local crypto lender Three Arrows Capital has not put a halt to government support of the industry—although officials have introduced more aggressive regulation, including curbs on both retail trading and promotion of cryptocurrency on social media.
The co-founder of Wintermute Trading, a digital assets trading firm backed by Lightspeed, announced in July his plans to relocate to Singapore to support the company’s focus on Asia.
Back in the US, Justin Slaughter, policy director of crypto firm Paradigm and a former adviser to the acting SEC chair, predicted in an interview with The Block that any sweeping crypto regulation in the US will stay in a holding pattern until at least after the 2024 election cycle.
Whether Hong Kong and Singapore will continue on their upward trajectories as popular cryptocurrency trading hubs remains to be seen. “There’s a lot of eyes on how this all plays out and what that means for the ecosystem as a whole, especially on the financial side,” Chow said.
Featured image of Hong Kong’s financial district by Philip Fong/AFP, Getty Images
