Crypto regulation in Singapore has evolved from one that was heavily tilted towards anti-money laundering efforts to one that is also focused on customer protection.
In a world where the value of Bitcoin has skyrocketed past the $100,000 mark and Donald Trump has snagged yet another headline-worthy appointment, regulators around the world have been busy coming up with regulations, acknowledging the evolving nature of crypto assets, from niche interest to mainstream financial instruments.
Crypto in Singapore
Singapore has long been known for its forward-thinking and innovative approach to finance and technology and is one of the earliest jurisdictions to come up with crypto assets specific regulations.
Initially, the focus of crypto regulation was heavily tilted towards anti-money laundering (AML) efforts. However, as the market matured and the public's engagement with digital assets grew – especially after the dramatic FTC collapse - the regulatory lens widened to include customer protection.
Singapore's stance is clear: cryptocurrencies might not be the best playground for retail investors. The city has implemented measures to cool off retail speculation and trading, such as a ban on public advertising and restrictions on credit-based trading services for the average investor, though these don't apply to accredited investors. This strategy mirrors the trend of major liquidity providers and market makers setting their sights on the non-retail crowd in Singapore.
Despite past challenges with banking services for crypto businesses, the situation has improved, especially for entities with payment services licences. This positive development is partly thanks to guidelines from the Singapore regulator and initiatives by local banks like DBS, which has launched its own cryptocurrency exchange for accredited investors.
For those in the crypto business, the journey to obtain relevant digital asset licenses in Singapore was once a test of patience. However, given the roll out of a series of regulations and guidelines in 2024, there's been a noticeable acceleration in the process in the past few months.
Regulatory framework unpacked
In general, where activities are already regulated by existing legislation, the same rules apply to such activities even if done with crypto assets. For example, where security tokens are offered or listed in Singapore, such an offering or listing would have to abide by the requirements of the Securities and Futures Act 2001 (SFA). To put it another way, the Singapore government takes a technology-agnostic approach to regulation, i.e. the fact that something is done digitally would not make it any less regulated than its non-digital predecessor, as long as both are the same in substance.
Aside, the legislation most typically relevant to crypto asset businesses would be the Payment Services Act 2019 (PSA), under which crypto assets typically fall within the category of ‘digital payment tokens’:
1. Dealing in digital payment tokens, i.e. buying and selling of digital payment tokens, acting as a dealer-broker, etc.
Facilitating the exchange of digital payment tokens, e.g. establishing and operating a cryptocurrency exchange.
2. The custody and control of digital payment tokens for customers (including safeguarding and acting on customer instructions).
3. The transfer of digital payment tokens, i.e. akin to remittance business activity, albeit for crypto assets (this includes situations where the service provider does not come into possession of the moneys or digital payment tokens).
To note, pursuant to the Financial Services and Markets Act 2022 (FSMA), Singapore entities that carry out the abovementioned activities, even if all activities are carried on outside of Singapore (e.g. to non-Singapore customers only), would also need to be licensed. It is contemplated that the relevant portion of the FSMA will become effective early 2025 and in addition to those activities regulated above under the PSA, the following will also become regulated activities:
1. Providing services aimed at inducing or attempting to induce any persons to engage in transactions involving the buying or selling of digital tokens in exchange for money or other digital tokens.
2. Providing services relating to the sale or offer for sale of digital tokens including providing advice through publications or writings or issuing or promulgating research analyses or research reports.
Licensing requirements and the MAS
Where a person carries on business of the abovementioned regulated activities in Singapore, such person would need to obtain a licence under the PSA. We would highlight certain key licensing requirements (this is a non-exhaustive list):
Depending on size and scale, the business would require a base capital of S$100,000 ($74,037) or S$250,000.
1. Depending on size and scale, the business may need to provide a security deposit of S$100,000 or S$200,000.
The business would require at least one executive director who is a Singapore citizen or Singapore permanent resident, or at least one executive director who is a Singapore employment pass holder and at least one other director who is a Singapore citizen or Singapore permanent resident.
2. The business must have a permanent place of business or a registered office in Singapore where the books and records can be securely held, and at least one person must be appointed to be present at the place of business or a registered office to address any queries or complaints from consumers.
Entities which have received a licence to provide digital payment token services are subject to further requirements, which include (this is a non-exhaustive list):
Safeguarding customer moneys (such as through undertakings/ guarantees by a safeguarding institution, or by depositing in a trust account with a safeguarding entity), and other assets (not including money) through a trust account (maintained by another person, or the licensee themselves).
1. Effective controls in place to mitigate conflicts of interest arising from the safeguarding arrangements, and periodic review of such arrangements.
2. Record keeping requirements for each customer’s assets.
A global perspective with local application
Singapore's regulatory approach to crypto assets is both global in its standards and local in its application. Whether a business operates within Singapore or serves Singaporean customers from abroad, it must navigate the regulatory landscape with care, adhering to the rules and contributing to the city-state's reputation as a secure and dynamic financial hub.
In conclusion, as the crypto market continues to evolve, Singapore's regulatory framework offers a model of how jurisdictions can encourage innovation while ensuring market integrity and consumer protection. For businesses and investors alike, understanding and navigating these regulations is key to unlocking the potential of digital currencies in a safe and sustainable manner.
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