01. Licensing and Regulations
Table of Contents
As one of the world’s leading financial cities, it will be reassuring to investors if a crypto company is regulated by the finance authorities.
Are cryptocurrencies legal tender in Singapore?
The Monetary Authority of Singapore (MAS) does not recognise cryptocurrencies as legal tender (i.e. cannot be used to make payment in Singapore). Cryptocurrencies are not regulated as well.
The risks you are exposed to when trading in cryptocurrencies and their derivatives
Came across this article on moneysense.gov.sg
Key takeaways:
- Cryptocurrencies and their derivatives are highly risky products, and there are no MAS regulations that protect your money or cryptocurrencies.
- Cryptocurrencies and their derivatives are unregulated, except for cryptocurrency derivatives which are listed on Approved Exchanges licensed by the MAS.
- If you trade in unregulated products, MAS is unable to help you if you face difficulties in recovering your assets such as cryptocurrencies and monies, or become a victim to unfair or manipulative practices.
- Companies are licensed by MAS to address the risks of money laundering and financing of terrorism. They are not required to put in place measures to safeguard consumersā money or cryptocurrencies.
- You may not be able to recover any of the cryptocurrencies or monies that you deposited with the service provider if:
- they are stolen or lost due to hacking of your account, misappropriation, or
- the service provider is going bankrupt, or
- you encounter problems withdrawing funds from the DPT service providers.
- You may not be able to recover any of the cryptocurrencies or monies that you deposited with the service provider if:
- DPTs are not suitable for retail investors because they have no intrinsic value and are subject to sharp price swings driven by speculation.
Regulations
Financial Services and Markets Bill [Passed on 5 Apr 2022]
Legislated on 5 Apr 2022, the Financial Services and Markets Bill:
- assigns new powers to Singaporeās Monetary Authority which will be able to prohibit persons considered as unfit to perform key roles, functions and activities from working in the fields of payments and risk management;
- increases the maximum penalty that can be imposed on financial institutions that disrupt their services to SGD 1 million (USD 738,000).
- will require virtual asset service providers in Singapore to be licensed even if they only do business overseas
- previously, such firms were not regulated for anti-money laundering and countering the financing of terrorism.
Monetary Authority of Singapore (MAS) board member Alvin Tan said:
“We could be exposed to reputational risks brought by digital token service providers created in Singapore, and which provide services relating to virtual assets such as Bitcoin outside Singapore. The FSM Bill seeks to mitigate such risks by licensing these players and imposing AML/CFT requirements on them.”
Payment Services (PS) Act
The Payment Services (PS) Act is a forward looking and flexible framework for the regulation of payment systems and payment service providers in Singapore. It provides for regulatory certainty and consumer safeguards, while encouraging innovation and growth of payment services and FinTech. Parliament passed the PS Act on 14 January 2019.
This law was created after several consultation papers (such as Consultation Paper on the Proposed Payment Services Notices on Prevention of Money Laundering and Countering the Financing of Terrorism) which identified four key risks in the e-payment ecosystem:
- Money laundering and terrorism financing
- User protection (safeguarding e-funds in transit, as well as deposited e-funds)
- Interoperability (a common payment standard and infrastructure)
- Mitigating technological risks through governance, authentication, cyber hygiene, encryption and anti-fraud
Under the Payment Services Act, major payment institutions that carry on a business of providing an account issuance service must ensure that the currency equivalent of the eāmoney contained and/or transferred in any period of one year in a personal payment account does not exceed the prescribed amount of S$5,000 and S$30,000 respectively. It also prohibits e-wallets from providing local cash withdrawal services.
Travel Rule
The Travel Rule requires financial institutions and crypto companies - otherwise known as Virtual Asset Service Providers (VASPs) - to collect data from participants when transferring assets.
In June 2019, international regulators (FATF) introduced the Travel Rule as a way to combat Anti-Money-Laundering/Counter-Financing-Terrorism (AML/CFT) challenges associated with the increasing usage of cryptocurrencies across the globe.
What is the Financial Action Task Force (FATF)?
Extract from official website:
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
With more than 200 countries and jurisdictions committed to implementing them. The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.
The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity. The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.
Basically, whenever a user of one exchange sends/receives cryptocurrency worth more than 1,000 USD/EUR to a user of another exchange, the originating exchange must share identifying information about both sender and recipient with the beneficiary exchange, in an āimmediate and secureā manner.
These rules will only be applied to Virtual Asset Service Providers (VASPs) such as cryptocurrency exchanges, and will not affect individuals who choose to transact in cryptocurrencies.
The Monetary Authority of Singapore (MAS) has incorporated the Financial Action Task Force Value Transfer Requirements (āTravel Ruleā) under the Payment Services Act (Notice PSN02).
Thus, the Payment Services Act (PS Act) in Singapore requires VASPs to comply with the Travel Rule.
Stablecoin Regulatory Framework
The Stablecoin Regulatory Framework (see MAS media release) was unveiled on 15 August 2023, following a public consultation in October 2022:
- applies to single-currency stablecoins pegged to the Singaporean dollar or any G10 currency.
- issuers of such stablecoins seeking regulation in Singapore must meet certain requirements related to value stability, capital and redemption capitals.
- stablecoins must hold minimum base capital 1 million Singapore dollars ($740,000) and provide redemption within no more than five business days of a request
Licensing Developments
In Aug 2021, The Monetary Authority of Singapore (MAS) has notified āseveralā providers of digital payment token (DPT) services that it is prepared to grant regulatory consent for them to operate in the city state.
According to MAS, Digital payment token service includes the buying or selling of digital payment tokens, or providing a platform to allow people to exchange such tokens in Singapore.
MAS has received 196 applications as at end-May 2022. A total of 108 applications are pending review; 3 have been rejected, and 74 withdrawn.
In a statement released in August 2022, MAS clarified that Payment Services Act (PSA) licensing involves regulation around money laundering and terrorism financing risks as well as technology risks.
Firms are not subject to risk-based capital or liquidity requirements, nor are they required to safeguard customer money or digital tokens from insolvency risk. It said thatās similar to the approach taken in most jurisdictions.
This means it may not be possible to recover all the money or DPTs you paid to your DPT service provider if your DPT service provider’s business fails.
āMAS has been continually reminding the general public that dealing in cryptocurrency is highly hazardousā
āNot only are the values of cryptocurrencies extremely volatile, customersā monies are not protected under the law.ā
Licensed Entities
- BHEX.SG [Aug 2022]
- founded in 2018
- operating under BHOP Consulting Pte Ltd
- received the Standard Payment Institution license from the Monetary Authority of Singapore (MAS)
- Coinbase [Oct 2023]
- Coinhako [May 2022]
- DBS Vickers Securities (Singapore) Pte Ltd [Oct 2021]
- Digital Treasures Center (DTC) [1 Aug 2022]
- becomes Major Payment Institution (MPI) license holder able to provide regulated Digital Payment Token (DPT) service
- received in-principle approval previously in March 2022
- Fomo Pay Pte Ltd [Sep 2021]
- First to be granted licence
- Independent Reserve SG Pte Ltd [Oct 2021]
- First cryptocurrency exchange to be granted licence by MAS
- Our coverage on Independent Reserve is here
- MetaComp [Dec 2022]
- formerly known as Cyberdyne Tech Services, MetaComp has secured a Major Payment Institution license from the Monetary Authority of Singapore (MAS) to provide digital payment token services.
- firm offers a digital asset exchange built on the cloud and powered by the Nasdaq trading engine.
- parent company MetaVerse Green Exchange (MVGX) holds the Recognised Market Operator and Capital Market Service licenses
- Paxos [Nov 2022]
- press release: Paxos Secures Major Payments Institution License from Monetary Authority of Singapore
- first US-Based Blockchain Infrastructure Platform to Secure Regulatory Oversight in Key Financial Hubs of New York and Singapore
- received in-principle approval previously in March 2022
- Revolut Technologies Singapore Pte Ltd (RTS) [Aug 2022]
- UK-based fintech unicorn becomes Major Payment Institution (MPI) license holder able to provide regulated Digital Payment Token (DPT) service
- received in-principle approval previously in April 2022
- Revolut app will now support the buying, selling, and holding of cryptocurrencies
- Sparrow Tech [Aug 2022]
- becomes Major Payment Institution (MPI) license holder able to provide regulated Digital Payment Token (DPT) service
- received in-principle approval previously in June 2022
- Sparrow Tech was acquired by Amber Group in December 2022
- Sygnum Singapore [Oct 2023]
- Singapore arm of Swiss digital asset bank Sygnum
- Triple A Technologies Pte Ltd [Nov 2021]
- Upbit Singapore Pte. Ltd [Jan 2024]
In principle approval (IPA)
- Ripple (XRP) [Jun 2023]
- Ripple is a San Francisco-based fintech company
- license will allow Ripple to offer regulated digital payment token products and services and expand the cross-border transfers of XRP
- Blockchain.com [Oct 2022]
- Circle [Nov 2022]
- issuer of USDC and Euro Coin
- license allows Circle to offer digital payment token products, as well as cross-border and domestic transfer services in Singapore.
- announced plans to establish a regional hub in Singapore back in November 2021.
- entered a partnership with Singapore payments company FOMO Pay in March 2022 to allow FOMO Payās clients to convert between USDC and fiat currency.
- Crypto.com [Jun 2022]
- Genesis [Jun 2022]
- subsidiary of Digital Currency Group which also owns CoinDesk.
- provides institutional investors with services including secure, discreet buying and selling, borrowing and lending in large sizes over fixed-terms, custody services to secure assets, and screening to ensure KYC and AML requirements are met.
Hodlnaut [Mar 2022]Announced withdrawal of license application in August 2022, and halted all withdrawals, token swaps and deposits.for the Token Swap feature
- Luno Singapore [Apr 2022]
- already regulated by the Securities Commission of Malaysia and registered with Indonesian authorities
Licence exemption under Payment Services (PS) Act
Most crypto entities in Singapore are currently operating under an exemption for a licence for the provision of account issurance and digital payment token services under the transitional arrangements in the Payment Services Act. The list of exempted entities can be found here.
Monetary Authority of Singapore (MAS) had earlier said that this exemption applies to entities that were carrying on regulated business before the start of the Payment Services Act on Jan 28, 2020.
The exemption allows an entity to continue providing its services while its licence application is being processed, and lasts until the licence application is approved, rejected or withdrawn.
List of platforms operating under licence exemption from MAS covered on our site:
- AAX
- Bitstamp
- Cake DeFi
- Coinbase
- Coinhako
- On 16 Nov 2021, Coinhako received in-principle approval from MAS under the Payment Services Act (PSA) for Digital Payment Token (DPT) Services
- Crypto.com App
- Crypto.com Exchange
- Gemini
- Liquid
- Luno
- Okcoin
- Tokenize Xchange
- Zipmex
Entities removed from exemption list
The list of entities that are NO LONGER EXEMPTED is here. Notable entries:
- Bitget (SINGAPORE BITGET PTE. LTD.)
- Kraken (PAYWARD PTE. LTD.)
Entities suspended or ordered to stop servicing Singapore users
- Bitget: Singapore Regulator Suspends Bitget Crypto Exchange Over Dispute With Korean Band BTS [Dec 2021]
- Binance: ordered to stop providing services to residents in Singapore [Sep 2021]