Singapore to have new AML/CFT payment services regulatory framework for cryptocurrencies

Singapore will soon have a regulatory framework on the prevention of money laundering and countering the financing of terrorism for payment services. In a parliament session held on 3 October 2017, Deputy Prime Minister (DPM) and Minister in charge of the Monetary Authority of Singapore (MAS), Mr Tharman Shanmugaratnam, replied to a question by Ms Cheng Li Hui, asking if the Singapore Government would be regulating cryptocurrencies.

As part of his answer, Mr Tharman reminded that cryptocurrencies are not legal tender in Singapore even though some people have put their trust in them as a means of payment. He further mentioned that the rate of adoption in Singapore is low in terms of volume, compared to countries such as US, Japan and Hong Kong.

Due to the anonymous nature of transactions, cryptocurrencies can be exploited for money laundering and terrorism financing. In particular, MAS issued a statement on 1 August 2017 regarding their regulatory position on Initial Coin Offerings (ICOs) –

ICOs are vulnerable to money laundering and terrorist financing (ML/TF) risks due to the anonymous nature of the transactions, and the ease with which large sums of monies may be raised in a short period of time.

In the reply, Mr Tharman mentions that ICO may face targeted legislation if necessary. Since ICOs issues token that is structured in the form of securities, the ICO should comply with existing securities laws that are aimed at safeguarding investor’s interests.

Project Ubin

As part of Singapore’s initiative to understand the technology behind cryptocurrencies, a collaborative project was initiated to study Distributed Ledger Technology (DLT) for the clearing and settlement of payments and securities. In the proof-of-concept report, the Singapore Dollar (SGD) was tokenised and put through a variety of DLT use cases such as using the blockchain for identity verification for Know-your-customer (KYC) purposes and cross-border payments.

With the upcoming AML/CFT regulatory framework on payment services and cryptocurrencies, Singapore may be on track to be the first country in South East Asia to issue a legal tender tokenised currency.