Singapore’s regulatory framework
During the last few years, a “globalization” effect has been evidenced regarding the use of cryptocurrencies, but especially in Asia, where they have sought to promote the use and innovation of the world of cryptocurrencies; one of the most proactive cases is that of Singapore.
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It stands out because the government, given the increase in the number of companies and operations that were taking place due to the interest of the population, sought to intervene in a market niche that they knew had great potential.
One of the first measures they took was through the Monetary Authority of Singapore (MAS), which decreed that all those companies wishing to operate through cryptocurrencies must comply with the established minimum parameters.
First of all, all companies must do know-your-customer (KYC) and anti-money laundering (AML) due diligence, in order to prevent the crypto ecosystem from becoming a kind of black market or an environment in which you have no parameters.
Among the main measures applied in the KYC process is facial recognition, which consists of a selfie of the customer together with an identity document. So although the process is “simple”, as it only consists of uploading a selfie and an identity document, it can be a bit tedious for some investors; but undoubtedly in Singapore and much of Asia it has been an extremely effective process.
Secondly, in 2019 the Payment Services Act was passed, which marked the beginning of the exchange of cryptoassets under the regulation and supervision of the MAS. This authorization marked a milestone in the history of the country and the region, as Singapore is among the five countries with the most operational users, while various analysts affirm that Asia is the continent with the highest number of operations worldwide.
It should be taken into consideration that such KYC and AML processes are a daily occurrence in traditional financial markets and therefore it was decided to extend the measure to cryptocurrency exchanges. One of the most prominent cases in recent years was that of Apical Asset Management Pte Ltd and Asiaciti Trust Singapore Pte Ltd. Both cases stand out because the MAS considered that the companies did not comply with the minimum parameters established in the AML law.
In the case of “Apical” the MAS decided to revoke their operating license in the country because after an inspection they discovered deficiencies in AML policies, since due diligence was not done and therefore the risk of receiving money illegally and collaborate directly and / or indirectly with money laundering was present between 2013 and 2018. Apical became the first company in the country to have its operating license revoked due to AML policies.
In the case of Asiaciti Trust, it was also determined that they did not comply with AML procedures, but in this case a fine of USD$1,100,000 was applied, due to the bad procedure towards high risk clients. It can be seen how in Singapore there have been successful cases against money laundering and corruption by applying due diligence laws such as KYC and AML.
Currently, cryptocurrencies are being discussed to be implemented as an official means of exchange, i.e., cryptos can be implemented together with traditional means of payment such as transfers or points of sale. Although there is not a 100% union between cryptos and regulators, a clear harmony can be observed and it is an example for other countries.
Incentives for investors
Singapore has undoubtedly taken the lead as one of the countries with the highest growth projections, ranking 8th by 2022, behind countries such as Thailand, the Philippines, Brazil, Turkey, among others. This growth in the region and in Singapore has brought several advantages to investors, not only in the short term, but also in the long term.
Investors have realized that in Asia, regulations towards exchanges are strengthening at a good pace, but without the need to resort to controversies that generate controversies worldwide; therefore, the clarity of the regulatory framework by the Singapore government towards the different companies that operate with cryptos has become one of its main incentives.
In addition, one of the most important points to note is that the government has sought to implement all these measures in order to protect all parties involved, i.e. both companies and the crypto world, as well as investors. That is why KYC measures, although they can be a bit tedious and delay part of the process, generate an incentive to know that companies are properly regulated and therefore investors’ money is within a healthy and safe ecosystem.
It should not be overlooked that all these developments have brought with them a significant level of innovation, and among the main innovative measures is the proposal to create a digital currency driven by MAS and the Central Bank of Singapore.
On October 31, 2022, the authorities declared that the project is underway, but they have no urgency to bring it to market yet, because although there are means of payments that are related to cryptocurrencies, there is not a need for such a currency. The project is in its first stage of four possible ones to be made, but Singapore is looking to get ahead of everyone and be able to make a whole range of products and services available.
As stated by Monetary Authority of Singapore authorities, “Electronic payments in Singapore are ubiquitous, and households and businesses in Singapore are already able to transact digitally in a fast, secure and seamless manner today. […] Arguments in favor of a retail CBDC in Singapore could be strengthened over time, especially if innovative uses emerge.”
It is expected that Singapore will continue to work together with various institutions nationally and internationally in order to expand innovation and regulations to the rest of the world. Furthermore, the growth potential of blockchain technology is still far from being reached, so it would not be surprising if Singapore and much of the Asian continent are the “pioneers” in seeking to raise awareness, or be one of the most proactive.
One of the biggest challenges will be keeping pace with the evolution of blockchain technology and cryptocurrencies, and ensuring that the regulatory framework remains up to date and relevant as it moves forward. But as of today, Singapore and the rest of Asia have sought to remain leaders in the cryptocurrency ecosystem, and at least in the medium-to-long term that is not expected to change.