Challenges and Transformations Facing the Web3 Ecosystem in Singapore

Web3, as the next generation of the internet based on blockchain technology, is garnering widespread attention globally. It demonstrates tremendous potential in fields such as fintech, with the promise of creating innovative applications like cross-border payments, programmable money, digital asset trading, and tokenization.

As one of the international centers of Web3, Singapore has long attracted numerous enterprises with its favorable policy environment, ample financial support, and rich talent resources. However, in recent years, this status has been facing challenges, as some Web3 companies and investors are beginning to consider leaving Singapore in search of more advantageous development opportunities.

Trends in Enterprise Migration

Many well-known Web3 companies have chosen to relocate their headquarters out of Singapore. For example, the smart contract platform Zilliqa moved its headquarters to London in 2021; the decentralized exchange protocol Kyber Network relocated to Israel in 2020; the cryptocurrency service platform Crypto.com moved to Hong Kong in 2018; and the blockchain data exchange platform Interconnections moved to Australia in 2021. This trend of relocation has raised concerns within the industry about the future development of Singapore's Web3 ecosystem.

Changes in Policy Environment

Singapore's Payment Services Act, implemented in January 2020, established a licensing regime for Digital Payment Token Services (DPTS), making it the first country in the world to comprehensively regulate cryptocurrency exchanges. This initiative was initially seen as support for the Web3 industry.

However, in October 2022, the Monetary Authority of Singapore (MAS) released a consultation paper on regulatory measures that proposed a series of recommendations aimed at protecting consumer interests and mitigating risks. These measures include restricting retail customers from using leverage or credit for cryptocurrency trading, regulating the advertising methods of digital tokens, and requiring DPTS providers to offer more information disclosure, among others. These new regulations are considered likely to increase operational costs and compliance risks for businesses, potentially affecting market vitality and innovation.

At the same time, other regions are actively promoting the establishment and reform of regulations related to Web3. For example, Hong Kong plans to implement a new virtual asset licensing system in June 2023, allowing licensed platforms to provide services to retail investors and opening up derivatives trading. These measures are attracting more companies and investors to the Hong Kong market.

Changes in Capital Flow

Singapore's Web3 sector once had abundant funding resources, including government funds, venture capital institutions, private equity funds, and family offices. However, since the second half of 2022, increased global economic uncertainty and intensified fluctuations in the cryptocurrency market have led some funds to withdraw from or reduce investments in the Web3 sector. This has put Web3 companies under pressure from increased financing difficulties and declining valuations.

At the same time, other countries and regions are actively attracting Web3 capital inflows. For example, Switzerland provided a clear and friendly legal framework for Web3 companies through the "Blockchain Law" in 2021. Switzerland also has the world's largest cryptocurrency bank, offering professional and convenient financial services for Web3 companies. These measures are attracting more international capital and enterprises into the Swiss market.

Talent Mobility Trends

Singapore once had an excellent pool of Web3 talent, including technical developers, entrepreneurs, managers, and consultants. However, since the second half of 2022, Singapore has tightened its policies on foreign population, coupled with the increasing demand for Web3 talent in other regions, leading some talent to begin leaving Singapore in search of places with better development prospects and quality of life.

Other countries and regions are attracting Web3 talent through favorable visa policies, job opportunities, and living environments. For example, Estonia has introduced a digital nomad visa that allows remote workers to stay locally for an extended period while enjoying digital services and social benefits. Estonia also has the largest blockchain community in Europe, providing a platform for communication and collaboration for Web3 talent.

Cost of Living Factors

The higher cost of living in Singapore is one of the factors affecting the development of the Web3 ecosystem. According to data, a single person needs an average of about 3,300 SGD per month for living expenses, while a family of three needs about 4,800 SGD, excluding education costs. These high living expenses have prompted some Web3 practitioners to consider moving to areas with a lower cost of living.

Southeast Asian countries such as Malaysia, Thailand, and Indonesia are attracting more and more Web3 practitioners due to lower living costs, more flexible regulatory systems, and abundant talent resources.

Conclusion

The Web3 ecosystem in Singapore is facing challenges in terms of policy, funding, talent, and cost of living. These factors have led some Web3 companies and investors to consider leaving Singapore, which could affect its position and influence in the global Web3 space. Singapore needs to find a balance between regulation and innovation to maintain its attractiveness as an international center for Web3.