The Monetary Authority of Singapore (MAS) is updating its regulatory framework for digital payments.
Announced Tuesday, Singapore’s Payment Services Act 2019 (PSA) brings so-called Digital Payment Token (DPT) services – effectively covering all crypto businesses and exchanges based in Singapore – under current anti-money laundering (AML) and counterterrorist-financing (CTF) rules.
As such, crypto businesses in Singapore are required to first register and then apply for a license to operate in the jurisdiction.
Similar to the Fifth European Anti-Money Laundering Directive (AMLD5), which went into effect Jan. 10, Singapore’s new rules are long awaited: the PSA was passed back in January 2019. In the intervening months, Singapore has further cemented itself a forward-thinking jurisdiction in regulating the cryptocurrency industry.
As of Jan. 28, firms will have a month to register with MAS, stating they are based in Singapore and are operating a DPT business. Once firms have registered, there’s a six-month grandfathering period during which they have to apply for a payment institution license.
“The Payment Services Act provides a forward-looking and flexible regulatory framework for the payments industry,” MAS Assistant Managing Director Loo Siew Yee said in a statement. “The activity-based and risk-focused regulatory structure allows rules to be applied proportionately and to be robust to changing business models. The PS Act will facilitate growth and innovation while mitigating risk and fostering confidence in our payments landscape.”
When it comes to implementing crypto regulations, countries around the world are dancing to the beat of the latest Financial Action Task Force (FATF) recommendations, first made in October 2018 and then updated in June 2019.
This means preparing for a future when payment data relating to the originator and beneficiary of a crypto transaction travels with the payment, guidance known as FATF’s “travel rule.”
“The interesting thing about the Monetary Authority of Singapore is that, in a sense, it’s FATF-ready,” said Malcolm Wright, head of the AML Working Group at trade group Global Digital Finance. “They were first out the door with a consultation back in July saying this is what we are proposing in terms of the implementation of the PSA, as it relates to sending origination and beneficiary information.”
MAS also launched a consultation just before Christmas, adding some amendments to the PSA regarding digital assets. Further aligning Singapore with the FATF, the amendments widen rules to include the transfer of DPTs (as well as them being exchanged); the provision of custodial wallets for or on behalf of customers; and the brokering of DPT transactions.
“They [MAS] have gone a bit further than FATF in terms of some criteria, but at the same time some of the other aspects of it are probably not as far as FATF has intended,” said Wright, who is also chief compliance officer at Diginex, a Hong Kong-based firm offering institutional-grade infrastructure for digital assets.
There are always fears regulation could stifle innovation in such a nascent space as crypto. Indeed, the advent of AMLD5 across Europe may bring increased M&A activity as firms consolidate to meet the increased costs of regulation.
U.K.-based Bottle Pay, a cryptocurrency payments provider, said it was closing down in December 2019, citing forthcoming EU money laundering rules; crypto mining pool Simplecoin and bitcoin gaming platform Chopcoin were also reported to be shutting down for the same reason.
Meanwhile, Deribit, a Netherlands-based crypto derivatives exchange, said it’s planning to relocate to Panama because its home country’s version of AMLD5 “would put too-high barriers for the majority of traders, both regulatory and cost-wise.”
David Carlisle, head of community at blockchain analytics firm Elliptic, offered a different take. He said the AMLD5 regulations imposed on crypto firms are “bread-and-butter requirements,” including know-your-customer (KYC) procedures and the monitoring of suspicious transactions. Firms will need an appointed person to carry out these tasks, he said, such as a money-laundering reporting officer.
“We have certainly not heard any rumblings or intention by businesses to move their operations,” said Carlisle. “Singapore and Switzerland are two countries that show you can strike a balance between having meaningful regulation in place and not being prevented from attracting businesses.”