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Singapore’s Digital Currency Regulations: A Comprehensive Guide

Yes, it is legal to own and exchange cryptocurrencies in Singapore. The Payment Services Act of 2019 defines crypto as a medium of exchange, making it possible to use it to purchase goods and services or discharge debts.

Regulatory Bodies Governing Crypto in Singapore

The Monetary Authority of Singapore (MAS) governes crypto as digital payment tokens (DPT). The MAS has defined DPTs as “a broad category of digital representations of money, whether or not generated by blockchain.”

AML/KYC Requirements for Singapore Crypto Businesses

The Payment Services Act is the key legislation governing crypto in Singapore. One focus area is Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), dealt with by Notice PSA-N02. The PSN02 guidance puts in place robust AML/CFT guidelines and regulations to detect and stop illegal flows of cryptocurrency funds through Singapore.

Regulatory Requirements

Crypto businesses must:

  • Carry out risk assessments of their users
  • Conduct customer due diligence
  • Implement enhanced due diligence measures for higher-risk customers
  • Monitor transactions for unusual patterns
  • Report suspicious transactions
  • Maintain detailed records of users and keep them updated regularly

Travel Rule Requirement

In Singapore, the Travel Rule is implemented through Notice PSNO2. The rule requires crypto businesses to submit originator and beneficiary information to the beneficiary. The MAS has not stipulated a threshold for the Travel Rule to apply, but for transactions below SGD 1,500, only basic information is required.

Licensing Requirements

Crypto businesses must apply for a digital payment service providers license from the MAS. The agency uses an activity-based licensing system that considers ML/TF risks rather than a one-size-fits-all regime.

Stablecoins Regulations

The Payment Service Act regulates stablecoins as e-money. Issuers of digital tokens that can be classified as e-money (stablecoins) will require a PSA license. However, the e-money definition does not cover algorithmic stablecoins or non-collateralized stablecoins.

Recent Development: StraitsX Releases XSGD

On October 5, 2020, StraitsX released XSGD, a Travel Rule-compliant stablecoin backed 1:1 with the Singapore dollar. The coin is issued under StraitsX’s Major Payment Institution (MPI) license and can be minted in unlimited amounts while corresponding fiat is held and safeguarded in segregated accounts with a fully regulated MAS-approved bank.

Conclusion

Overall, Singapore’s digital currency regulations aim to strike a balance between promoting innovation and ensuring the integrity of the financial system. The country has established a comprehensive framework for crypto businesses, including licensing requirements, AML/CFT guidelines, and Travel Rule implementation.