All You Need to Know About the New Singaporean Payment Institution License

Should I get a Singaporean payment institution license? Does it suit crypto companies? Is it reputable? In this article, we’re answering all these questions about the new regulation in Singapore.
All You Need to Know About the New Singaporean Payment Institution License

As of January 2020, the Payment Services Act has been effective in Singapore. The new law has permitted the cryptocurrency business to operate in the country and has created compelling opportunities for crypto companies. Let’s dive deeper into this regulation and figure out both the benefits and the limitations of the new regime.

Who the new regulation is for

The Payment Services Act has created a clear legal framework for payment and e-money companies, dividing up the services that they can offer into several categories:

  • Digital payment token
  • E-money issuing
  • Domestic money transfers
  • Cross-border money transfers
  • Merchant acquisition
  • Account issuing
  • Money-changing

For crypto businesses, the most interesting type of service is a Digital Payment Token Service (DPTS) that has been introduced in Singapore for the first time ever. The service encompasses everything that one can do with digital tokens, i.e., cryptocurrency:

  • Buying
  • Selling
  • Exchanging
  • Depositing
  • Transfering

The new law has also established a special license for companies that want to provide such payment services. So, let’s take a closer look at what this license is about.

The new licensing landscape for payment services

The new Singaporean license has been divided into three classes:

  • The money-changing license, which suits businesses that only provide a money-changing service (i.e., the buying or selling of foreign currency)
  • The Standard Payment Institution (SPI) license, which allows its holders to provide any kind or number of payment services, including operations with cryptocurrency. However, these are within certain limits:
    • S$3m (around $2,2m) in monthly transactions for one of the payment services (excluding e-money account issuing and money-changing services)
    • S$6m ($4,4m) in monthly transactions for two or more payment services (other than e-money account issuing and money-changing services)
    • S$5m ($3,7m) of daily outstanding e-money
  • The Major Payment Institution (MPI) license, which offers the same opportunities for companies as the SPI license does, but is meant for larger companies that go beyond the thresholds aforementioned

The type of license that a company should go for purely depends on the nature and scale of the company’s business.

Why there is a hype about the new license

The new crypto regulation in Singapore has recently attracted quite a bit of attention. Let’s find out why more than 500 companies have decided to apply for the Singaporean payment institution license.

  • Growing economy: Singapore is already one of the world’s top financial hubs, and it is constantly innovating. The Monetary Authority of Singapore (MAS), the financial and AML regulator, has created a friendly and sustainable environment for fintech companies.
  • Procrypto environment: The new flexible regulation for payment services providers has a favorable license regime with low fees; Singapore is eager to support the development of crypto businesses.
  • Lenient tax system: There are no taxes on the profits generated outside of Singapore. The income from a local activity is subject to a mere 8,5% for the first S$300,000 ($220k) and 17% for anything above.
  • Uncorrupted reputation: Singapore is one of the most respectable financial centers in the world. Its reputation as a stable, technology-oriented jurisdiction makes it an attractive place for business and investment.

Although the new license has numerous advantages, it would be only fair to mention certain limitations, so one can make an informed decision:

  • Customers of payment service providers cannot withdraw cash from their e-money accounts or exchange their e-money for Singaporean currency.
  • Customers of payment services providers can store no more than S$5000 ($3600) on their e-wallets and transfer no more than S$30,000 ($22k) annually.

Now, that we’ve covered the license’s benefits and drawbacks, let’s talk about the application requirements.

The license requirements

So, you needed a crypto license and decided to go for a Singaporean one. What are the requirements for companies, and how strict are they?

  • Registered business: A company must be either a local one or a foreign one that is registered in Singapore.

    Setting up a company in Singapore is quite easy. You need a standard set of documents, such as the Company Constitution and information on directors and shareholders, a minimum paid-up capital of a meager S$1 ($0,73), and the registered address. The company’s registration fee accounts for S$300 ($220), and the name approval fee is just S$15 ($11).

  • Business activity: A permanent place of business or a registered office needs to be located in Singapore.

    Companies are not required to have their headquarters in the country—a registered branch is enough.

  • Local director: At least one executive director should be a citizen or permanent resident of Singapore.

    Alternatively, an executive director can be a foreigner if they obtain the Employment Pass and if there is at least one non-executive director who is a Singaporean citizen or permanent resident.

    The Employment Pass allows foreign professionals to work in Singapore. To get the pass, one needs to uptake a managerial, executive or specialized job in Singapore with a minimum salary of $3,900 a month. This number slightly exceeds the average salary in Singapore, which is around $3200.

    As for the directors’ roles, there can be several executive and non-executive directors on a company’s board, with executive directors running operations on a daily basis, and non-executive ones providing a general oversight.

  • Capital: A minimum base capital accounts to S$100,000 ($73k) for the SPI license and S$250,000 ($182k) for the MPI license.

That’s it for the license requirements, so now we can move on to the application process and related costs.

Obtaining the new license

The application process for any kind of payment institution license takes place online. During the application, the company states the service(s) that it wants to carry out in the application form. Let’s take a closer look at what businesses need to obtain the license.

  • Documents for submission: In addition to the application form, companies must submit their business profile, financial statements, an AML compliance program, etc. For the full list, please see the application checklist on the second page.

    At the time of submission, companies must have all the AML & KYC procedures implemented. Should you need some help, please check out Sumsub’s customizable solution—we offer due diligence checks for all jurisdictions, including Singapore.

    It’s worth mentioning that there are additional requirements for crypto businesses. They have to provide a full list of the digital tokens they want to offer in addition to the token services’ risk assessment, supported by a legal opinion.

  • Application fee: The minimum application fee is S$1,000 (around $735) for the SPI license and S$1,500 ($1,100) for the MPI one.
  • Annual fee: Businesses pay S$5,000 ($3,670) for the SPI and S$10,000 ($7,330) for the MPI licenses.

Both application and license fees can be higher depending on the type and number of payment services a company wants to offer. Let’s say a company is a standard payment institution and plans to provide only a digital payment token service. In this case, it pays S$1,000 for the application and S$5,000 for the license. Although if it wants to offer multiple services, then the fees can multiply.

If you need assistance with your license application, we’ll be happy to lend a helping hand.

Another point for consideration—the AML & KYC approach in Singapore

The AML & KYC requirements in Singapore are quite balanced; they are not as strict as in many European countries but can still guarantee a secure environment. Let’s take a look at the two specific AML & KYC obligations in Singapore:

  • KYC procedures: The MAS permits automated non-face-to-face Customer Due Diligence (CDD). The onboarding flow may include biometric verification (facial recognition, fingerprint scans, etc.) to ensure the best fraud mitigation practices.
  • The FATF’s Travel Rule compliance: While businesses must apply due diligence checks to all transactions, there are specific requirements for transactions that take place in virtual currencies. Singapore has adopted the FATF’s Travel Rule, which obliges senders and receivers of cryptocurrency to provide personal information, such as names and account numbers. Senders must additionally provide their address, identity number, date and place of birth.

For detailed information, please check the MAS’s guides on AML & CFT for all payment service providers and AML & CFT for digital payment token service providers.

All in all, there are many benefits for obtaining the Singaporean payment institution license, such as the new flexible regulation, low taxes and license fees. At the same time, the regulation requires a solid AML framework, so businesses should not overlook compliance.

If you’re not sure whether you should go for the Singaporean license, check out our webinar, where we’ve discussed all of the pros and cons of the new regulation.

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