Blockchain Legal & News

Introduction to Singapore’s cryptocurrency and blockchain ecosystem

Alexia Pollacco 09 Oct 2020

The Republic of Singapore located in Southeast Asia has established itself as one of the largest hubs for crypto and blockchain in the world, boasting a crypto-friendly banking system and a digitized economy which attract financial service providers from across the globe. This article will provide a brief overview of the crypto ecosystem in Singapore and outline the set-up process for those seeking to provide services in the jurisdiction.  

The Payment Services Act 

The Payment Services Act came into force in January 2020 and sets out the main regulatory framework for blockchain and crypto in Singapore. The Act regulates Digital Token Service Providers who deal in digital tokens by buying or selling digital payment tokens in exchange for money or another digital payment token. Effectively, the Act sets out a licensing framework for centralised service providers such as exchanges and over-the-counter (OTC) desks which deal in digital payment tokens.

Digital payment tokens are defined by the Act as:

“any digital representation of value (other than an excluded digital representation of value) that – 

  1. is expressed as a unit; 
  2. is not denominated in any currency, and is not pegged by its issuer to any currency; 
  3. is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt; 
  4. can be transferred, stored or traded electronically; and  
  5. satisfies such other characteristics as the Authority may prescribe”.

Therefore, digital payment tokens automatically exclude most stablecoins and all securities, and are mostly limited to tokens that are purely used as a means of payment generally or on the network on which they are issued. 

Licensing Regime 

In order to provide payment services in Singapore a licence must be obtained from the Monetary Authority of Singapore. Digital token service providers must obtain a standard payment institution licence or a major payment institution licence, and offer at least the service of dealing in digital payment tokens, with additional services that may be applied for as well. A major payment institution licence is required if the average, over a calendar year, of the total value of all payment transactions that are accepted, processed or executed by the licensee in one month exceeds S$3 million for any single payment service, or S$6 million for two or more of those payment services. 

A number of institutions are exempt from this licensing requirement, namely licensed banks, merchant banks approved as financial institutions, licensed finance companies and persons licensed to carry on the business of issuing credit cards or charge cards.  

In order to obtain a standard payment institution licence or a major payment institution licence, a number of requirements must be satisfied. Firstly, the applicant must be a company or a corporation formed or incorporated in Singapore or overseas, and must have a permanent place of business or registered office in Singapore. One of the executive directors must also be a citizen or permanent resident of Singapore. The Guidelines on Fit and Proper Criteria must also be satisfied, which require the applicant and its key individuals to be fit and proper persons who can prove to be competent, honest, and financially sound.  

The applicant must also satisfy the minimum financial requirements, which are set at a base capital of minimum S$100,000 for a standard payment institution licence, and S$250,000 for a major payment institution license.  

Registration Procedure 

Prospective applicants must pay an application fee of S$1000 in order to obtain a standard payment institution license, or S$1500 to obtain a major payment institution license. Prospective applicants must appoint a compliance officer and an independent compliance function in Singapore, and must also have compliance and audit arrangements in place. The Monetary Authority of Singapore then takes around six months to process the application.  

BCA Solutions (BCAS) is well-placed to provide professional assistance in selecting the right jurisdiction for the set-up of your operations and the provision of services, with a team made up of regulatory and technical experts that have ample experience in relation to the blockchain and crypto industries. Get in touch today for a free consultation call. 

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