Singapore grants first crypto licence under new Payment Services Act

The Monetary Authority of Singapore (MAS) has granted the first “in-principle” approval to a cryptocurrency provider under the Payment Services Act 2019, allowing Independent Reserve to provide a digital payment token service in the city state.

Singapore has seen an increasing number of companies that are involved in blockchain and cryptocurrency choosing to relocate or expand to the city state, according to Raks Sondhi, managing director at Independent Reserve.

“With what the MAS is doing, as well as the launch of the Payment Services Act, it was actually a big factor for us to make a decision to expand to Singapore,” Sondhi told Regulatory Intelligence.

AML/CFT compliance

The Singaporean central bank has imposed stringent anti-money laundering and counter-financing of terrorism (AML/CFT) measures for companies applying for a crypto licence. The authority closely scrutinises applications and considers various factors.

“These include the applicant’s understanding of risks relating to money laundering and financing of terrorism and the technology risks posed by their business model, as well as the adequacy of controls instituted to mitigate such risks,” said Tharman Shanmugaratnam, senior minister and minister in charge of MAS in reply to a question in Parliament regarding “digital payment token service provider applicants” on July 26.

“We will reject applicants who fail to meet the required standards for ML/TF and technology risks set out in MAS’ regulations and notices.”

Ahead of granting a licence, MAS will examine applicants’ customer due diligence mechanisms, transaction screening, compliance structures and the robustness of their information technology services.

“We have always focused on being pro-regulation,” Sondhi said. “Our AML and know your customer (KYC) operations have actually been regulated in Australia by AUSTRAC.”

The rules of travel

“The only additional process flow that we have to put into this was actually factoring in the Financial Action Task Force’s Travel Rule.”

Independent Reserve has established a base of 200,000 customers in Australia and New Zealand before moving to Singapore, expects its official licence to be effective in four to eight weeks’ time.

New Payment Services Act

Under the new Act, which took effect last January, companies that were already engaged in regulated activities were eligible to be “grandfathered” if they submitted licence applications before the end of a specified grace period. The grandfathering grace period ended last July.

Ninety digital payment token service providers currently operate under this exemption, Shanmugaratnam said. Binance has also been included in the exemption list to offer services to retail and institutional investors while waiting for its licence.

“The exemption remains in force until the applications are approved or rejected by the MAS or withdrawn by the applicant,” Shanmugaratnam said.

MAS has received more than 480 licence applications since the new Act become effective. Around 170 applicants (or 35%) have applied to provide digital payment token services. Thirty DPT applications (or 18%) have been withdrawn after engagement with MAS and two have been rejected, according to the central bank.

Written by: Zeng Yixiang, Regulatory Intelligence Correspondent for Southeast Asia, Thomson Reuters

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