Singapore expands crypto rules, now covers custody and payments

Singapore has broadened the scope of its digital asset regulations to encompass the custody of tokens and a wider range of firms involved in fund transfers, as part of the city-state’s ongoing efforts to establish itself as an institutional hub for the industry while promoting user protection and financial stability.

The amendments to the Payment Services Act (PS Act) will come into effect in stages starting from April 4, 2024, according to a statement released by the Monetary Authority of Singapore (MAS) on Tuesday. The changes aim to “impose user protection and financial stability-related requirements” on digital payment token (DPT) service providers.

As Singapore competes with other jurisdictions like Hong Kong and Dubai to attract digital asset businesses, the city-state is focusing on creating a regulatory framework that fosters innovation while protecting investors and addressing the challenges associated with the crypto industry’s regulatory history.

Under the revised regulations, service providers that facilitate the transmission or exchange of tokens will now fall under the PS Act’s purview, even if they do not come into possession of the money or coins involved. Additionally, companies enabling cross-border transfers will be subject to the act, regardless of whether the funds are accepted or received in Singapore.

The MAS stated that these measures will enable the authority to “impose requirements relating to anti-money laundering and countering the financing of terrorism.” The amendments also empower the MAS to enforce user protection and financial stability requirements on DPT service providers.

Angela Ang, senior policy adviser at blockchain intelligence firm TRM Labs, noted that some of these amendments have been in the works for years and “bring regulatory clarity to key parts of the crypto ecosystem.”

According to an initial coverage from Bloomberg, transitional arrangements will be provided for entities currently conducting activities that fall under the PS Act’s expanded scope. These entities must notify the MAS within 30 days and submit a license application within six months from April 4, 2024, if they wish to continue their activities on a temporary basis while their applications are under review.

The license application must also be accompanied by an attestation report, completed by a qualified external auditor within nine months from April 4, 2024, detailing the entity’s business activities and compliance with anti-money laundering and countering the financing of terrorism requirements.

Entities that fail to meet these requirements are obligated to cease their activities when the amendments come into effect. The new rules also include measures such as segregating customers’ assets in trust accounts, maintaining proper books and records, and ensuring effective systems and controls are in place to protect the integrity and security of customers’ assets.