SINGAPORE — Singapore on Tuesday passed a law that extends its cryptocurrency regulations to companies with a local presence that provide digital token services outside the city-state, as authorities further tighten rules around the emerging industry.
Lawmakers approved the Financial Services and Markets Bill 2022, which was brought up in parliament for debate on Monday. The law brings digital token service providers created in Singapore but who provide their services elsewhere under the purview of domestic regulators.
The legislation covers industry players who deal in Bitcoin, Ethereum and other digital currencies, facilitate their exchange or offer financial advice on the sale of these tokens, among other activities.
Crypto players operating in Singapore and serving the local market are already regulated by the city-state’s central bank. They are required by law to adhere to licensing requirements as well as be able to guard against money laundering and terrorist financing.
But those who do not provide digital token services in the city-state were not under the same oversight. The new law changes this, requiring all crypto players, whether they serve the local or foreign markets, to come under the same licensing requirements.
“Sad, disappointed — we went 10 steps backwards,” said a member of a crypto lobby group in Singapore who spoke on condition of anonymity. The source questioned the necessity of digital asset players with a base in the city-state being licensed if they do not target domestic consumers, which was a worry for the central bank. “So MAS [the Monetary Authority of Singapore, the city-state’s financial regulator and central bank] is making the assumption that the license is like gold — that everyone will want to get it?”
Alvin Tan, a board member of the MAS, explained the state’s reasoning to parliament on Monday.
“We could be exposed to reputational risks brought by digital token service providers created in Singapore, and which provide services relating to virtual assets such as Bitcoin outside Singapore,” he said. “The FSM Bill seeks to mitigate such risks by licensing these players and imposing AML/CFT requirements on them.”
Singapore is not alone in tightening its scrutiny of the booming crypto sector.
Last month, Thailand issued a ban against payments using cryptocurrencies and other digital assets in a bid to maintain stability in financial markets.
China has banned all cryptocurrency payments and services for disrupting the “economic and financial order.”
In 2019, Japan’s Financial Services Agency imposed stricter information technology requirements on licensed exchanges, following security breaches and hacking incidents that marred the industry.
In January, Singapore published a set of guidelines instructing crypto players to stop marketing or advertising their offerings to retail investors in public spaces, both physical and virtual, calling the trading of such assets “highly risky and not suitable for the general public.”
The law approved on Tuesday has also garnered some positive reactions.
Singapore-based Anndy Lian, chairman of Netherlands-registered crypto trading platform BigONE Exchange, told Nikkei Asia that the city-state’s enhanced regulations are “reasonable.”
“If you walk the ground hard enough, you will see many bad actors and dubious crypto companies using Singapore as a base of their operations,” he said. “We need to properly regulate things so that the bad actors won’t affect this industry’s image.”
Even before the new law hit the books, the MAS had been busy processing license requests. In January it said there were about 180 applications for permits, more than 60 of which were withdrawn or rejected. Only a handful of applicants were successful, though others were awaiting the central bank’s decision.
With the tightened regulations, the central bank is poised to sift through a batch of additional license requests as Singapore-based crypto players that mainly deal overseas are now required to meet the state’s standards if they want to use the city for their operations.
In March, Singapore-based payments company Digital Treasures Center, which provides a platform to facilitate cryptocurrency transactions, said it received in-principle approval from MAS to provide digital payment token services.
Desmond Yong, its chief strategy officer, told Nikkei that crypto players will need to devote additional resources to monitor foreign transactions so as not to run afoul of the new law.
“For companies that are unable to fulfill the AML/CFT requirement, they will need to move out to other countries,” he said. “But with more governments regulating cryptocurrency in different jurisdictions, these companies will soon find it hard to operate.”
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.