Global Cryptocurrency Regulation Vol 2: 'Singapore'

Summary

1. A turning point in money laundering cases—From relaxed regulations to enhanced transparency

In 2023, a multi-billion dollar money laundering case emerged, prompting Singapore, previously a tax haven and foreign investment-friendly nation, to shift its policy. Particularly for cryptocurrencies, due to their cross-border nature and associated high risks, unlicensed firms are requested to cease overseas services by June 2025. Non-compliance could lead to fines up to approximately 29 million yen and up to three years of imprisonment.

2. DTSP regulations make licenses mandatory for 'overseas services'

The new guidelines are based on the FSM Act, requiring DTSP companies providing services abroad to obtain an official license from MAS (Monetary Authority of Singapore). However, exceptions for license issuance may be made if MAS recognizes the business model's rationality and compliance with international standards.

3. License conditions are stringent—Capital requirements of 250,000SGD plus strict AML/CFT measures

Requirements include:

• AML/CFT systems, external audits, and legal opinions
• Maintaining a minimum capital of 250,000SGD
• Technical risk management and cybersecurity measures
• Annual costs of 10,000SGD plus regular audits

Only a few companies will be able to obtain licenses, and those without substantial operations will be excluded.

MAS (Monetary Authority of Singapore) shifts towards enhancing transparency

Singapore, with a population of about 6.11 million and a land area of about 720 km², slightly larger than the 23 wards of Tokyo, is a small country. With a low birth rate and a small population, the country has historically set low corporate tax rates and provided investment incentives to attract talented individuals from abroad. Initially, there were hardly any foreign investment regulations.

However, in 2023, a multi-billion dollar money laundering case was uncovered domestically. The risk of illicit funds entering under the guise of investment incentives became apparent, prompting MAS to shift towards enhancing transparency.

Particularly, cryptocurrencies, due to their online service usage and cross-border transaction nature, pose high risks of money laundering, terrorism financing, and proliferation financing.

Therefore, MAS has requested cryptocurrency firms without an approved business license to cease services abroad by June 30, 2025. Violations could result in fines up to 250,000SGD (approximately 29 million yen) and a maximum of three years imprisonment.

Guideline Overview

• Cryptocurrency businesses providing services overseas, known as 'Digital Token Service Providers' (DTSP), are targeted
• Unlicensed cryptocurrency businesses are requested to cease services abroad
• The guidelines aim to outline the application process and criteria for obtaining a business license, as well as ongoing requirements

Market Impact of the Regulation

Mandatory Licensing……DTSPs providing services internationally must obtain licenses. This could reduce market participants.

Consumer Protection & Transparency……Obligations for trust management of customer assets, risk disclosure, and complaint handling systems are required. Investor trust will increase, but operational costs for providers will rise.

Market Sanitization and Selection……Non-substantial businesses and malicious operators will be eliminated, leaving only trustworthy players. This could initially lead to a decrease in transaction volume and limited service options.

Impact on Innovation……Resources will need to be allocated for regulatory compliance, affecting the speed of new service development. However, a safer environment for legitimate operators will be established, leading to healthy market growth in the medium to long term.