Singapore enacted a bill on Tuesday that expands the city-cryptocurrency state's restrictions to firms with a local presence that provide digital token services outside the city-state, as officials tighten their grip on the booming industry.
Legislators adopted the Financial Services and Markets Bill 2022, which was introduced for debate in the House of Commons on Monday. The law places Singapore-based digital token service companies that operate in other countries within the jurisdiction of domestic regulators.
The legislation applies to industry participants who, among other things, deal in Bitcoin, Ethereum, and other digital currencies, facilitate their exchange, or provide financial advice on the sale of these tokens.
Singapore's central bank already regulates cryptocurrency players operating in the city-state and supplying the local market. They must comply with licensing standards and be capable of preventing money laundering and terrorist funding.
Those that do not supply digital token services in the city-state, on the other hand, were not subject to the same scrutiny. This is changing with the new rule, which requires all crypto participants, whether they operate in domestic or international markets, to adhere to the same licensing standards.
On Monday, Alvin Tan, a MAS board member, outlined the state's reasons to parliament.
"We may be exposed to reputational risks presented by Singapore-based digital token service providers that offer services related to virtual assets such as Bitcoin outside of Singapore," he added. "The FSM Bill intends to limit such risks by licensing these players and requiring them to adhere to AML/CFT regulations."
Singapore is not alone in stepping up its monitoring of the burgeoning cryptocurrency industry.
Thailand banned payments made using cryptocurrencies and other digital assets last month in an effort to ensure financial market stability.
China has banned all cryptocurrency payments and services, citing concerns that they may undermine the country's "economic and financial order."
In 2019, Japan's Financial Services Agency tightened information technology standards for regulated exchanges in response to industry-wide security breaches and hacking occurrences.
Singapore issued a series of recommendations in January urging cryptocurrency players to refrain from selling or advertising their offers to retail investors in public locations, both real and virtual, deeming such trading "extremely dangerous and unsuitable for the general public."
Additionally, the bill enacted on Tuesday has elicited some good responses.
Even before the new law took effect, the MAS was busy processing license applications. In January, it reported that over 180 permission applications were received, with more than 60 being withdrawn or refused. Only a few candidates were approved, however others were awaiting a judgment from the central bank.
With the tougher laws, the central bank is expected to filter through an influx of extra license requests, since Singapore-based crypto players that primarily conduct business overseas must now adhere to the state's norms in order to conduct business in the city.
In March, Singapore-based payments business Digital Treasures Center announced that it has gained in-principle clearance from the Monetary Authority of Singapore to provide digital payment token services.
According to Desmond Yong, the company's chief strategy officer, crypto players would need to commit greater resources to monitoring overseas transactions in order to avoid running afoul of the new regulation.
"Companies who are unable to comply with the AML/CFT standard will be forced to expand into other countries," he explained. "However, as more governments regulate cryptocurrencies across many countries, these businesses may eventually find it difficult to operate."
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