Cryptocurrency exchange regulation in Singapore

Singapore has taken a more progressive and cryptocurrency friendly stance than most of its regional neighbors, that have in many cases banned cryptocurrency activities and businesses completely. In Singapore, however, both cryptocurrency exchanges and cryptocurrency trading is legal, and while cryptocurrencies (usually referred to as “digital tokens”) are not classified as a legal tender, the authorities see at least Bitcoin as a good, thus applying Goods and Services Tax (=the local version of VAT) to Bitcoin.
All this has contributed to Singapore becoming perhaps the most important cryptocurrency hub in Asia in recent years.

Legislation relevant specifically to cryptocurrency exchanges in Singapore

The local Payment Services Act that regulates cryptocurrency exchanges (known in the city-state as digital payment token – DPT- service providers) came into effect in 2020 and also regulates traditional payment services.
The act places cryptocurrency exchanges with a “meaningful presence” in Singapore (meaning offices, directors etc.) under the oversight of the Monetary Authority of Singapore or MAS for short, the regulator issuing the relevant licenses, and also the country’s Central Bank.

MAS has chosen to apply existing legal frameworks for cryptocurrency exchanges where possible but the Payment Services Act made it clear that all cryptocurrency businesses are required to obtain a license from the Monetary Authority of Singapore, as well as follow all regulations related to Anti Money Laundering and Counter Funding Terrorism measures. The regulator also has the right to ban individuals deemed as unsuitable from engaging in cryptocurrency businesses.

The Payment Services Act is not the only law that cryptocurrency exchanges must follow, additionally also the Financial Advisers Act, Insurance Act, Securities and Futures Act and the Trust Companies Act apply to these companies.

The 3 different licenses that may be relevant for DPT service providers

• DPT service providers can choose between the following 3 licenses, depending on the scope and activities of their business:
  Money changer
  This is suitable for companies only providing money-changing services.
• Standard payment institution
  Relevant for companies who have average monthly transactions of under $3 million, or $5 million in digital currencies per day.
• Major payment institution
  Suitable for bigger service providers, whose average monthly transactions per day exceed the above mentioned amounts. Requires a higher capital threshold than the other 2 licenses – $250,00, as well as a $100,000 security deposit.

Requirements for the licenses

Those wishing to obtain a license for DTP services providers must fulfill the following requirements, no matter which license is chosen:

• Have an office in Singapore.
• Commit to compliance with the FATF Recommendation 16’s “Crypto Travel Rule”
• Commit to compliance with comprehensive AML/CFT requirements that include record keeping, due diligence, Know Your Customer procedures, reporting suspicious transactions etc.
• Payment of annual fees.
• Reporting duties.
• A correct administrative structure, including a CEO, a chairperson and a board of directors.

Interested in finding out more?

If the above sounds like a good fit for your cryptocurrency exchange and/or you would like to compare Singapore as a jurisdiction with other jurisdictions that may be relevant for regulating your cryptocurrency exchange you are welcome to contact us for more information.

We also offer consulting services related to banking and payments in Singapore, as well as for other service providers you may need should you decide to register a company in the city-state and regulate your cryptocurrency exchange there.