New Law in Singapore: What Is The Updated Requirement to Crypto Firms

Crypto companies and exchanges are to register with Singapore financial regulator and obtain suitable licenses
New Law in Singapore: What Is The Updated Requirement to Crypto Firms

On the 28th of January, the Monetary Authority of Singapore (MAS) has announced a new requirement under current AML and CTF rules that all crypto businesses and exchanges operating in Singapore have to comply to.

No different from the rest of the world, Singapore is gradually changing the way crypto is regulated in the country, much like the latest Financial Action Task Force (FATF) recommendations updated in June 2019 and the Fifth European Anti-Money Laundering Directive (AMLD5) enforced in January 2020.

Let’s look at the updated law in detail.

What is the new MAS requirement and who does it affect?

The new requirement makes it mandatory for all Digital Payment Token (DPT) Services or in other words, bitcoin (BTC) trading venues and crypto payments service providers, based in Singapore to obtain a license, that would allow their operation and determine the AML and CTF demands.

The announcement is not a surprise, as the Payment Services Act itself was passed back in the early 2019 and the country has been taking further steps to join other forward-thinking jurisdictions in creating a flexible regulatory framework for firms operating with cryptocurrency.

What crypto firms should do to comply

In order to comply with the updated MAS and successfully operate under the license, DPT services in Singapore have to implement strict AML/CFT procedures and policies, if they haven’t had them already.

  • Risk assessment and risk mitigation
  • Customer due diligence (CDD)
  • Enhanced measures in case of higher ML/TF risks
  • Transaction monitoring
  • Screening
  • Suspicious transactions reporting
  • Record keeping
  • Internal policies, compliance, audit, and training to manage such risks.

Another requirement is that they must comply with the “travel rule” specified in the recommendations of the Financial Action Task Force (FATF), meaning that payment data relating to the originator and beneficiary of a crypto transaction must travel with the payment itself.

Failing to provide all of the above will most probably result in hefty regulatory fines and damages to the company’s reputation. If you are confident in your AML/CFT measures, let’s look at the process of filing for an application.

How to get a MAS license

There are two basic stages to get a MAS license.

1. Register as a Singapore-operating DPT service

The MAS demands all Singaporean DPT services to register with them within a month since the announcement on January 28th. It means that all crypto businesses and exchanges operating in Singapore have to get registered before the end of February.

2. File for the license

Once these services have registered with MAS, they have to apply for a license to operate in the jurisdiction. The period for the application is six months. After that, the service will be considered for a payment institution license.

The MAS stated that there are no uniform licensing requirements, but an activity-based licensing framework.

Types of MAS licenses

In total, there are three available licenses.

  • Money-changing license

For those who only provide Money Changing Services. Such services will continue to be regulated in the same way.

  • Standard payment institution

Payment services with average monthly payment transactions for any activity < $3 million and an average daily e-money float < $5 million. Such services will be regulated more lightly.

  • Major payment institution

Payment services with average monthly payment transactions for any activity > $3 million and an average daily e-money float > $5 million. Such services will face more requirements—higher capital requirements on an initial and ongoing basis ($250k), $100k security deposit, etc.

The firms will be assigned a license according to their activity and the risks they pose. For example, all transactions under DPTS are considered to carry higher inherent money-laundering risks and, as was already mentioned earlier, require AML/CFT measures. The activity-based and risk-focused approaches will help MAS to apply the rules proportionally, without slowing down the growth and innovation.

Singapore has put itself among the few regions with some regulatory clarity for crypto businesses. In the same group of countries with advanced crypto laws is Japan and its Payment Services Act, that has been regulating crypto since 2017. Then we have Europe with its recent development in the form of AMLD5.

MAS has no intention of making the life of crypto firms more burdensome, quite the contrary, it believes the new law calls for flexible regulatory frameworks that will strengthen consumer protection and promote confidence in the use of electronic payments.

If you like how we think—check out other posts and solutions at Sumsub.

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