Singapore Implements Licensing Rules for Crypto Custody

Reinforcing its stance on cryptocurrency oversight, the Monetary Authority of Singapore (MAS) made a significant announcement on Tuesday, expanding the purview of regulated activities to encompass custodial services.

The regulatory expansion extends to various facets, including cross-border money transfers and the facilitation of crypto transmissions between accounts and exchanges, irrespective of whether the transactions involve Singapore as a recipient.

Legislative Evolution

The legislative framework underpinning these changes stems from amendments to the Payment Services Act (PS Act), ratified in 2021. Although initially slated for implementation in the fourth quarter of the same year, the MAS chose to enact the amendments only recently, on Tuesday. The decision to implement comes against the backdrop of significant upheaval within the cryptocurrency sector, notably triggered by the FTX crash in 2021, prompting global regulatory recalibration.

Angela Ang, a senior policy adviser at blockchain intelligence firm TRM Labs and a former MAS regulator, hailed the expansion as a much-awaited development offering regulatory clarity, particularly concerning custody services.

The revised regulations introduce stringent measures aimed at safeguarding user interests and ensuring financial stability within the digital payment tokens (DPT) or cryptocurrency service provider landscape. These include mandates such as segregating customers’ assets, maintaining comprehensive records, and implementing robust systems and controls.

Entities currently engaged in crypto-related activities under the Payment Services Act must initiate a transition process within 30 days and submit a license application within six months from April 4, 2024, to continue operations temporarily. Furthermore, compliance necessitates obtaining an attestation report on anti-money laundering and counter-terrorism financing measures from an external auditor within nine months.

Failure to adhere to the stipulated requirements will prompt entities to cease all crypto-related activities, as mandated by the MAS.

As Singapore takes decisive steps to fortify its regulatory landscape, stakeholders within the cryptocurrency ecosystem must swiftly adapt to the evolving compliance framework. The MAS’s move underscores its commitment to fostering a secure and resilient environment conducive to the sustainable growth of the digital asset industry.