Singapore Tightens Grip on Cryptocurrency to Combat Money Laundering
In a bid to prevent money laundering and terrorist financing, Singapore’s financial authorities have tightened regulations on cryptocurrency businesses operating in the city-state. The Monetary Authority of Singapore (MAS) has implemented robust anti-money laundering (AML) and combating the financing of terrorism (CFT) measures for digital payment token service providers.
What are Digital Payment Tokens?
Cryptocurrencies are considered a medium of exchange and can be used to purchase goods and services or discharge debt. The MAS defines digital payment tokens (DPTs) as a broad category of digital representations of money, whether or not generated by blockchain. DPTs are categorized into two groups:
- E-money: backed by stores of equivalent value in fiat currency
- Digital payment tokens: represent value without reference to fiat currency
AML/CFT Measures for Cryptocurrency Businesses
To ensure compliance with the Payment Services Act (PSA), crypto businesses operating in Singapore must put in place robust Know Your Customer (KYC), AML, and CFT procedures. The MAS has introduced a range of measures, including:
- Risk assessments: identify potential risks and vulnerabilities
- Customer due diligence: verify customer identity and conduct ongoing monitoring
- Enhanced due diligence for higher-risk customers: additional scrutiny for high-risk customers
- Transaction monitoring: track and analyze transactions to detect suspicious activity
- Suspicious transaction reporting: report suspicious transactions to the authorities
- Recordkeeping: maintain accurate records of all transactions and activities
Travel Rule Compliance
The MAS has implemented the Travel Rule, requiring crypto businesses to submit originator and beneficiary information for transactions above SGD 1,500.
Licensing Requirements
Crypto businesses operating in Singapore must:
- Apply for a digital payment service providers license
- Undergo regular account reviews to detect and prevent suspicious activities
- Implement an activity-based licensing system that considers ML/TF risks
Stablecoins Regulation
The Payment Service Act (PSA) regulates stablecoins as e-money, requiring issuers of digital tokens that can be classified as e-money to obtain a PSA license. However, the e-money definition does not cover algorithmic stablecoins, non-collateralized stablecoins, or commodity-collateralized stablecoins.
StraitsX’s XSGD Stablecoin
StraitsX, a Major Payment Institution licensed by the MAS for e-money issuance, has released XSGD, a Travel Rule-compliant stablecoin backed 1:1 with the Singapore dollar. This move demonstrates Singapore’s commitment to regulating and overseeing the industry to prevent money laundering and terrorist financing.
Industry Debate
The MAS consultation paper on the regulation of payment services based on emerging forms of payment has sparked debate among industry stakeholders, who are calling for greater clarity on the definition and regulation of stablecoins.
Conclusion
As the regulatory landscape continues to evolve, cryptocurrency businesses operating in Singapore must ensure they comply with the latest AML/CFT requirements to avoid penalties and reputational damage. The MAS’s efforts to tighten regulations will help prevent money laundering and terrorist financing, while also promoting a safe and secure environment for crypto businesses to operate in Singapore.