This has been a breakout year for cryptocurrency, with the digital asset industry growing faster than ever to a market cap of around $3 trillion.

But for all the expansion, the future is still unclear, essentially because cryptocurrency is not real money and lacks a proven track record as an asset class.

Monetary Authority of Singapore (MAS) managing director Ravi Menon told the Singapore FinTech Festival last month that the MAS frowns on cryptocurrencies or tokens as an investment for retail investors.

“The prices of crypto tokens are not anchored on any economic fundamentals and are subject to sharp speculative swings. Investors in these tokens are at risk of suffering significant losses,” he said.

That warning was certainly apt this year, with fraudsters stealing over $7.7 billion worth of cryptocurrency worldwide, an 81 per cent rise from last year, noted blockchain data platform Chainalysis.

But the MAS also feels that blockchains and crypto tokens have potential benefits, Menon added. That view led to significant regulatory milestones in Singapore this year.

The MAS granted four licences to provide digital payment token (DPT) services out of a pool of 170 applications.

Singapore-based fintech firm Fomo Pay, cryptocurrency payments provider TripleA, Australian cryptocurrency exchange Independent Reserve and DBS Bank’s brokerage arm DBS Vickers were the anointed quartet.

Other entities have also received in-principle approval from the regulator, and more licences are expected to be granted in the coming months.

Last month, blockchain technology provider Partior said it had achieved instantaneous cross-border payments on its platform when such end-to-end settlements in Singapore and US dollars typically take three to five days to clear.

With global cross-border transactions expected to reach $156 trillion next year, Partior – a joint venture by Singapore’s investment firm Temasek, DBS and JP Morgan – is aggressively seeking to get more players on board its real-time cross-border platform.

On a global level, big and familiar brand names have ventured into the space in recent years.

Twitter became the first social media platform to allow its users to receive tips in Bitcoin.

Last year, PayPal made a big push into crypto by allowing its account holders in the US to buy, hold and sell cryptocurrencies.

All these point towards one thing – we should expect increasing adoption of crypto, globally and in Singapore, said Sherry Goh, global expansion manager of crypto-exchange platform Luno, which has applied for a DPT licence from the MAS.

“The regulatory clarity has set a very good base to help foster further and proper development of crypto,” added Goh, who does not think cryptocurrency will become a main form of payment in Singapore in the near future, although she expects to see more people begin crypto trading.

Luno – founded in 2013 and headquartered in London – hit nine million users in October, with a million added in just over four months. It was a noteworthy milestone for the firm that took about five years to accumulate its first million customers.

In the early stages, cryptocurrency used to appeal to a relatively fringe community of anti-establishment and tech-savvy investors.

But today, the fear of missing out has driven many people to take the plunge, said Goh.

“Many of them may not be able to fully understand the crypto market, and they buy only Bitcoins or Ethereum.

“I urge people to not just focus on the upsides of crypto, but to also fully understand the downsides of crypto,” she added.

The growth in cryptocurrency, which is said to thrive on its volatility and speculative prospects, has been faster than ever amid the pandemic. Social media is seen to have a great influence over cryptocurrency prices.

When billionaire Elon Musk tweeted that “Dogecoin is the people’s crypto” in February, the price of Dogecoin surged by 50 per cent in one day.

Ow Kim Kit, a partner at law firm Bird & Bird ATMD, said: “Given the surge in popularity of crypto investing, the general public and retail investors should already be aware of the risks involved, and remain doubtful of any ‘social media hype’ pertaining to certain cryptocurrencies.”

Ow, a regulatory legal specialist, noted that it would be difficult for the authorities to implement regulations to protect prices as cryptocurrency is not legal tender.

The MAS has said that its approach to regulation under the Payment Services (PS) Act is to facilitate innovation while ensuring that adequate controls are in place to address key risks such as money laundering and terrorism financing.

In September, the MAS showed a firm hand to Binance for not meeting its standards when it ordered the world’s largest cryptocurrency platform to stop providing payment services in Singapore and to cease soliciting business from Singapore residents.

Binance, which had tried to obtain a DPT licence through its local arm Binance Asia Services (BAS), later said on December 13 that it would withdraw its application.

About 100 applicants have dropped out of the running so far, as they were unable to meet standards under the PS Act.

Binance also said BAS would shut its exchange platform in February next year and refocus its operations in Singapore to be a blockchain innovation hub.

Singapore remains an important blockchain hub to many firms, with its clear licensing framework and operating environment, meaning more jobs will be created as increasing numbers of foreign companies set up hubs in the city-state, said Blockchain Association Singapore co-chairman Chia Hock Lai.

In September, El Salvador became the first country to adopt a cryptocurrency – Bitcoin – as legal tender, although this step is still seen by most as a risky one, given its volatility.

As Bitcoin continues to gain acceptance as a unique financial asset worldwide, could it also become legal tender in Singapore one day?

“If and when crypto earns its place in life, then why not?” said Ow.

“I think there were many first movers of crypto, so to speak, who built an ideal that was at odds with established systems in our financial world.

“Anonymity, privacy and freedom in transactions, lack of centralisation and controls … I cannot see this integrating or aligning with our current systems which we have taken years and years to develop,” she said.

However, if crypto could become “universally regulated” and “be controlled” in every aspect pertaining to international standards for money laundering and terrorism financing, then it could one day be legal tender, added Ow.

In the meantime, this is her message to the crypto world: “Be good, be ready or be gone!”