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Overview of the Singapore Cryptocurrency Regulation

Singapore stands among the globe’s premier financial hubs, providing top-tier banking and associated financial services tailored for corporate clientele. The rapidly growing sector in the country’s financial industry is modern payment services and the accompanying infrastructure, with numerous well-funded startups driving innovation. The Singapore Government has proactively adapted its regulatory framework to stay in step with these advancements and emerging technologies, including the Singapore Cryptocurrency Regulation.

Singapore Cryptocurrency Regulation: Payment Services Act (PSA) 

The Payment Services Act (PSA), effective since January 28, 2020, was implemented as a crucial response to the rapid rise of risks associated with payment services, alongside Singapore Cryptocurrency Regulation.

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The Monetary Authority of Singapore describes the PSA as establishing a flexible regulatory framework, aiming to mitigate the impact of a payment service provider failure while fostering a progressive payments sector in Singapore. The integrated regulatory frameworks for payment services, including cryptocurrency, are overseen by the Monetary Authority of Singapore (MAS).

The Payment Services Act 2019, along with Singapore Cryptocurrency Regulation, governs the regulation of cryptocurrency-related services in Singapore, particularly those classified as “digital payment tokens.” It is deemed a licensable payment service and is governed by regulations to deal in or facilitate the exchange of these digital payment tokens. Approved cryptocurrencies are recognized as legal assets in Singapore, giving them the same status as other asset types.

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Singapore Cryptocurrency Regulation: The Policy Considerations and Objectives of the Regulation

The new legislation, including Singapore Cryptocurrency Regulation, has dual objectives: firstly, safeguarding Singapore’s financial stability and promoting fair competition among market participants; secondly, establishing a licensing regime and enabling direct oversight by MAS to ensure compliance with Anti Money Laundering and Countering the Financing of Terrorism regulations by payment systems and service providers. The MAS focuses on two main regulatory factors while developing the PS Act: designation and licensing.

Singapore Cryptocurrency Regulation: Designation Regime and Licensing Regime 

The designation regime permits MAS to regulate payment systems that, although not directly licensable, have systemic relevance.

Payment systems designated Under the Payment Servies Act: 

  • Systematically Important Payment System (SIPS): These are systems, such as the MAS Electronic Payment System, whose disruption could impact other actors or cause systematic disruption to Singapore´s financial system.
  • System-Wide Important Payment System (SWIPS): These kinds of system disruptions may not directly impact the financial system but have the potential to affect public confidence in either the payment systems or the financial system.
  • Any other designation that MAS deems is in the public interest to designate as such 

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Singapore Cryptocurrency Regulation: Payment Services Subject to the PSA 

You are required to acquire a license if you provide any of the specified payment services:

  • Account Issuance 
  • Domestic Money Transfers 
  • Cross-border Money Transfer Service 
  • Merchant Acquisition 
  • E-Money Issuance Service
  • Digital Payment Token Service 
  • Money Changing Service 

Singapore Cryptocurrency Regulation: What Kinds of Licenses Are Issued Under the PSA? 

The licensing framework under the PSA of three main categories of licenses: 

  • A money-changing license – Service providers offering money-changing services are restricted to such activities, while those involved in other payment services must obtain either a standard payment institution license or a major payment institution license, with the latter functioning similarly to its predecessor under the previous MCRBA. 

A standard payment institution license – Service providers under the PS Act can offer any combination of the seven designated payment services, as long as their average monthly payment transactions for any activity: 

  1. below SGD 3 million (averaged over a calendar year)
  2. their average daily e-money float is below SGD 5 million (averaged over a calendar year)
  • A major payment institution license – The license is reserved for businesses with major payment institution licenses, allowing them to perform all seven types of payment services beyond specified transaction flow or e-money float thresholds, subjecting them to more stringent regulations due to the higher associated risk.

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Singapore Cryptocurrency Regulation: Investor Protection 

Announced on July 3, 2023, the Monetary Authority of Singapore (MAS) introduced additional safeguards for Digital Payment Token (DPT) service providers to enhance investor protection. The measures target two main aims: preventing the misuse or loss of customer assets and implementing provisions for asset recovery in the event of insolvency by a DPT provider.

One of the measures is that DPT service providers must publicly disclose listing and governance policies for tokens, with senior managers overseeing decisions. Disclosures, communicated clearly to customers without trivializing risks, are expected to lack a prescribed template. 

The new measures also restrict DPT service providers from providing credit facilities for retail customers to purchase or hold DPTs and participating in leveraged DPT transactions. Additionally, they cannot accept credit or charge card payments, excluding foreign-issued cards, aligning with MAS’s policy to curb easy access to debt financing for cryptocurrency purchases.

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Singapore Cryptocurrency Regulation
Singapore Cryptocurrency Regulation

Crypto Providers Choosing Singapore 

An example of these crypto service providers that chose Singapore to conduct its business is Blockchain.com, a big name in the crypto game. Crypto.com, a Singapore-based cryptocurrency exchange, offers a comprehensive range of services including trading, investing, staking, wallets, and non-fungible tokens (NFTs). 

Revolut, a digital bank, has strategically also chosen Singapore as the destination for launching its Digital Payment Token (DPT) services, which seek to facilitate local consumers to purchase, trade, and store cryptocurrency via the Revolut platform. 

Click on the following link for the list of licensed crypto service providers in Singapore: https://fintechnews.sg/63023/crypto/here-are-all-the-licensed-crypto-services-providers-in-singapore/

Conclusion  

In response to escalating risks in payment services, Singapore’s Payment Services Act (PSA) introduces a flexible regulatory framework, aiming to mitigate failures and drive progress. With a “calibrated approach,” the focus on designation and licensing includes safeguarding investor interests.

Investor protection measures implemented enhance security for Digital Payment Token (DPT) service providers, addressing asset misuse and insolvency risks. The PSA embodies Singapore’s commitment to a dynamic and secure payment landscape.

Despite initial concerns, the choice of Singapore as a strategic hub by companies like crypto.com and Revolut is the nation’s appeal for navigating digital finance, showcasing the effectiveness of the Payment Services Act’s regulatory measures in fostering innovation and ensuring security. 

Hilary Agbo 

Explore our additional articles on Singapore:
Company Formation In Singapore: A Comprehensive Guide
Buying Property In Singapore: A Comprehensive Guide

Sources:
Licensing of payment service providers
Regulations and Guidance
MAS Publishes Investor Protection Measures for Digital Payment Token Services
The Licensed Crypto Services Providers in Singapore