DCG-owned cryptocurrency exchange Luno has reportedly decided to exit Singapore and scrap its permit application. The South African company had submitted its application to the Monetary Authority of Singapore (MAS) to become a regulated digital payment token service provider. However, it is now withdrawing its application owing to the high cost of regulatory compliance and an increase in competition in the local market.
Luno CEO Marcus Swanepoel announced the decision in a recent company blog post titled “Bidding Farewell to Singapore.” In the post, Swanepoel wrote that while the company valued Singapore, it had decided to focus on markets with a greater growth potential, implying that regulatory compliance in Singapore is comparatively expensive and time-consuming.
He said, “In the current regulatory climate, it has become difficult and costly for us to continue servicing our Singaporean customers whilst striving to comply with the regulations as set out by MAS. Given the evolving regulatory requirements, the high cost of regulatory compliance, and the increasingly competitive nature of our global market, we have decided to leave the Singapore market.”
The announcement has come as a blow to Luno’s Singapore-based customers who will have to withdraw their funds before the exchange’s official exit on 30th September 2021. Swanepoel assured customers that the company would assist them in the withdrawal process, stating, “We would like to reassure our customers that the security of their accounts and their assets is our utmost priority, and we will do everything to ensure a seamless and hassle-free experience for our customers.”
Luno’s decision to exit the Singapore market is hardly surprising. In recent years, Singapore has stepped up its regulatory efforts to clamp down on money laundering and terrorism financing. The MAS has introduced a regulatory framework covering digital payment tokens to ensure that digital payment token service providers comply with anti-money laundering and counter-terrorism financing regulations.
However, complying with the MAS regulations has proven to be expensive for crypto exchanges like Luno. Swanepoel’s blog post highlights the cost of regulatory compliance, stating that “the cost of regulatory compliance has become a significant burden for exchanges in Singapore.” This is not unique to Luno. Other exchanges that are operated out of Singapore have also reportedly faced difficulties due to the high cost of compliance.
Luno’s exit from Singapore underscores the challenges that digital payment token service providers face in countries with strict regulatory regimes. As the regulatory environment becomes increasingly complicated, many exchanges may find it difficult to operate within the legal framework. Some exchanges may choose to exit markets where compliance is prohibitively expensive, while others may develop business models that are better suited to the local regulatory environment.
It’s worth noting that despite Luno’s exit from Singapore, the company is still active in many other global markets. In fact, Luno has recently expanded its presence in North America and Europe, where it is trying to become a dominant player in the cryptocurrency market. Swanepoel’s blog post highlights the company’s plans to “double down” on its growth in regions where it has a significant presence.
In conclusion, Luno’s decision to exit the Singapore market highlights the challenges that digital payment token service providers face in complying with strict regulatory regimes. Exchanges like Luno need to be mindful of the cost of regulatory compliance and the increasingly competitive global market. Luno’s decision to focus on markets with greater growth potential is a sensible move that could see the company emerge as a dominant player in the cryptocurrency market.