Singapore implements licensing requirements for crypto custody services

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In a move aimed at improving regulatory oversight and safeguarding the interests of investors, Singapore has expanded the scope of its crypto regulations to include custody services and a broader range of activities related to cryptocurrencies. 

The Monetary Authority of Singapore (MAS) has introduced these important regulatory changes, marking a crucial moment in the nation’s approach to the thriving cryptocurrency sector.

Singapore’s move for crypto custody services

The legislative changes, initially approved by the Singapore Parliament in 2021, have now been made operational by MAS. The amendments to the Payment Services Act (PS Act) reflect Singapore’s proactive stance in adapting to the evolving landscape of digital finance.

The new regulatory framework casts a wider net, including cross-border money transfers and facilitating the transmission of cryptocurrencies between accounts and exchanges, regardless of whether the transactions directly involve the city-state.

Angela Ang, senior consultant for blockchain intelligence company TRM Labs and former regulator at MAS, welcomed the expansion of regulatory oversight as a long-awaited development that provides clarity, especially in the realm of custody services. 

The regulatory update comes against the backdrop of tumultuous events in the world of cryptocurrencies, including the collapse of FTX, which has highlighted the need for strong regulatory measures to mitigate risks and ensure market stability.

The amended regulations include strict requirements aimed at safeguarding the interests of users and strengthening the financial stability of the cryptocurrency ecosystem. 

Among the most important provisions are the segregation of clients’ assets in trust accounts for their benefit, meticulous maintenance of records, and the implementation of effective systems and controls. 

These measures are intended to strengthen the resilience of Singapore’s cryptocurrency infrastructure and instill confidence in investors and stakeholders.

The regulatory changes will come into effect within six months from April 4, 2024. Entities currently engaged in activities related to cryptocurrencies under the Payment Services Act are required to initiate a transition process within 30 days and submit license applications within the established deadlines to ensure continuity of operations.

The process of authorization of regulatory changes

The authorization process requires the obligation to provide attestation reports certifying compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. 

These reports, endorsed by external reviewers, serve to testify the entity’s adherence to regulatory standards and best practices for safeguarding against financial crimes.

Non-compliance with the prescribed requirements would result in the cessation of all activities related to cryptocurrencies, as highlighted by MAS. 

The regulatory framework highlights Singapore’s commitment to promoting an environment conducive to innovation, while also upholding the highest standards of integrity and consumer protection.

The transition to a comprehensive regulation reflects Singapore’s proactive approach in addressing the complexities of the digital finance landscape. 

By extending regulatory oversight to custody services and cross-border transactions, Singapore aims to achieve a delicate balance between promoting innovation and safeguarding against potential risks and vulnerabilities inherent in the crypto space.

As Singapore positions itself as a leading hub for fintech innovation, the implementation of robust regulatory measures underscores its commitment to nurturing a resilient and sustainable ecosystem for digital finance. 

With the cryptocurrency sector constantly growing and evolving, Singapore’s proactive regulatory stance sets a precedent for other jurisdictions grappling with the challenges of regulating emerging technologies in the financial sector.

Conclusions

In conclusion, Singapore’s implementation of licensing requirements for cryptocurrency custody services and the expansion of regulation of cryptocurrency-related activities represent a fundamental step towards promoting a safe and transparent digital financial ecosystem. 

Facing the challenges and emerging vulnerabilities in the cryptocurrency space, Singapore emphasizes its commitment to safeguarding the interests of investors and maintaining financial stability. 

The changes to the payment services law reflect Singapore’s proactive approach in adapting to the rapid evolution of the digital finance landscape, positioning the city-state as a global leader in fintech innovation. 

As the cryptocurrency sector continues to mature and evolve, Singapore’s solid regulatory framework serves as a model for other jurisdictions seeking to strike a balance between promoting innovation and mitigating risks. 

Through effective regulation and enforcement, Singapore aims to promote trust, encourage responsible innovation, and ensure the long-term sustainability of its digital financial ecosystem, setting a precedent for best regulatory practices globally.