CRYPTOCURRENCY firms in Singapore are crying foul against what they see as an indiscriminate closing of their bank accounts by local banks, which has rendered many of these "blockchain disruptors" unable to continue their operations here.
It has also left the Monetary Authority of Singapore (MAS) uncomfortably wedged between encouraging innovation (the proverbial rock) and mitigating risk (the other hard place) - and right at the time when the blockchain sector is growing and coming under the glare of scrutiny globally.
At least 10 companies that provide cryptocurrency payment and trading services have encountered bank account closures in Singapore, said Anson Zeall, chairman of Access, an association representing companies involved in blockchain and cryptocurrencies here. The affected companies are among the 106 companies that are members of Access.
Mr Zeall has asked the Singapore government to step in and "demonstrate how to come to an effective resolution among all parties", Bloomberg reported on Tuesday.
Chia Hock Lai, president of the Singapore Fintech Association (SFA), said some of his organisation's 185 members have also experienced bank account closures, but did not provide figures. SFA has a broader membership than Access, and companies can be members of both groups.
The Business Times understands that firms that have had their bank account shut down here typically open a new account in another bank and use that in the interim. Some have relocated to countries where the cryptocurrency ecosystem is more mature and the regulations, more liberal, such as the US and Japan.
BT also understands that suspicion of money laundering is the reason behind the bank account closures, although none of the local banks would confirm this. Citing banking secrecy as a reason, the banks also declined to say whether the closed accounts were those of cryptocurrency firms here.
CoinHako, a local startup that provides digital assets wallet services, said its bank account was closed down by DBS on Sept 8. In a blog entry, it announced that it would no longer be able to process deposits and withdrawals in Singapore dollars and that it was seeking alternative banking arrangements.
DBS said: "Account termination may be due to reasons such as failure to maintain the account in good standing, failure to provide timely and accurate information, unexplained inconsistencies in account behaviour, or unacceptable risk of criminal or terrorist behaviour."
OCBC said: "For risk-management purposes, we constantly review our customer accounts and may close these accounts for various reasons."
Asked whether cryptocurrency firms were on the banks' watch list, UOB said its robust risk-management processes and practices - including determining and verifying the nature and quality of the underlying assets of a business - apply to all firms, "whether or not they are tech-based companies".
DBS said: "No account is terminated merely because the customer is an innovator or disrupter. We bank and also publicly collaborate with many cutting-edge companies, including those which work with blockchain or distributed-ledger technology, and some of these seek to transform financial services."
The bank added that it remained open to exploring banking relationships with companies working with cryptocurrencies.
But the cryptocurrency firms here are not entirely convinced.
A founder of a local cryptocurrency exchange platform said: "The banks are doing this because they know that we are going to disrupt them." Another local cryptocurrency player told BT: "It's sad that MAS is remaining neutral on this. It has serious FOMO (fear of missing out) but it won't do anything."
MAS, when asked whether the banks' actions hinder blockchain innovation in Singapore, replied that it does not interfere with commercial decisions made by the banks, including those related to the establishment and termination of business relationships, and that it remains committed to developing Singapore as a reputable financial centre and fintech hub.
"It is important to recognise that (this) requires pairing a progressive and nurturing environment for fintechs with strong controls to mitigate risks such as fraud and money laundering. We must be mindful that new technological developments and products could bring with them new areas of risks, which the financial industry and regulatory authorities should pay heed to."