Understanding the Cryptoasset Landscape in Singapore

Rules and regulations governing the cryptoassets

Businesses that accept money to transmit to persons outside of Singapore or deals with fiat currency exchanges has always been licensed under the Money-Changing and Remittance Businesses Act. However, since early 2020, the licensing of these two activities falls under the Payment Services Act (PSA) regime.

From then onwards, entities that provides the service of issuing e-money, dealing in or facilitating the exchange of digital payment tokens (DPTs) must be licensed as a Standard Payment Institution (SPI) or a Major Payment Institution (MPI) under the PSA. Whereby the difference in both licenses is dependent on the average monthly volume.

Whereas exchanges that offers to buy or sell cryptoassets in forms of derivatives, securities or units in a collective investment scheme are required to be licensed under the Securities and Futures Act (SFA).

 

Who is allowed to trade crypto assets?

There are no current restrictions disallowing investors from trading cryptoassets. Whether cryptoasset exchanges must be regulated to operate either under the PSA or SFA depends on the kind of cryptoassets that are traded.

 

How are exchanges, secondary markets and alternative trading systems for cryptoassets regulated?

MAS decides based on the following criteria:

  • Possible likelihood to affect public confidence in Singapore’s capital markets and financial systems; and
  • The ability of the market operator to meet the obligations of an approved exchange.

 

Custodians

Depending on the overall business activity, most custodians are required to hold a capital markets services license (CMSL) for providing custodial services, unless otherwise exempted.

 

Broker-dealers

Depending on the cryptoassets amount to securities, units in a collective investment scheme, derivatives contracts or spot foreign exchange contracts for the purpose of leveraged foreign exchange trading ,the custodian may required to be licensed as CMSL.

 

Decentralised cryptoasset exchanges

If DPT is offered, the entity which facilitates such exchange must obtain a license under the PSA. Service providers as such are required to hold an SPI or MPI, depending on the monthly average volume.

Depending on the structure and operations of a decentralised cryptoasset exchange, it may be considered to operate an organised market under the SFA and be required to obtain approval as an approved exchange or recognised market operator.

 

Peer-to-peer (P2P) exchanges

The transfer of cryptoassets between individuals is not regulated in Singapore and may be subjected to AML laws and regulations.

 

Conclusion

Under the PSA and SFA administration, licensed entities are not able to transact with customers on an anonymous basis. Moreover, general KYC procedures must be conducted. To fend off crimes such as fraud, money laundering and terrorism financing, Singapore has established a Cryptocurrency Task Force to achieve the following duties:

  • Monitor the cryptocurrency landscape;
  • Develop and improve operational procedures in the investigation and seizure of cryptocurrencies; and
  • To establish working relationships with overseas law enforcement agencies, industry professionals and academic experts in cryptocurrencies.

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