The Asian city-state has been pretty lax about cryptocurrency market regulations, but the country’s strict Anti-Money Laundering measures signal stricter industry oversight in the near future. A compliance expert predicts that a possible wave of new regulations could force some of the crypto companies out of Singapore.
A recent report by Kyrrex on the state of cryptocurrency investment suggests that regulations in Asian countries are more welcoming to cryptocurrency businesses than in the West. Out of the Asian countries, Singapore stands out as one of the main hubs for crypto businesses to thrive, which can be largely attributed to the regulatory frameworks present in the city-state.
In general, Singapore offers a balanced regulatory package for cryptocurrencies. Cryptocurrencies are allowed by the government, while the cryptocurrency exchanges and other crypto service providers merely have to be registered with local authorities. At first glance, there are no regulatory measures that would put the digital asset market under the full control of the authorities.
Michel Farah, an Anti-Money Laundering(AML)/ Know Your Customer(KYC) compliance expert and CEO of ComplyTech, commented on the regulatory environment in Singapore and possible new measures in the future.
“Singapore has been a magnet for businesses and foreign investment for some time, thanks to its free-market and support for innovation and technology,” said Mr Farah. “Now, the city-state is attracting crypto and blockchain technologies due to its neutral legal system and openness to such market disrupters. In the last couple of years, there was a significant increase of investment in crypto and blockchain technologies, but now investors are cautious about the anticipated regulations. Singapore’s central bank has announced it is broadening its regulatory regime for payment providers to bring certain cryptocurrencies under its jurisdiction, with the new legislation due to come into force by the end of 2019. Cryptocurrency service providers are expected to be licensed under the new regulatory framework.”
Currently, laws in Singapore require any cryptocurrency exchange to be compliant with international AML and counter financing of terrorism (CFT) requirements. Although the country is perceived as having a relaxed legislative attitude towards cryptocurrencies in general, its AML and CFT laws are uncompromisingly strict for every entity, be it cryptocurrency-related or a traditional financial institution. Companies weary of new regulations are looking at current AML and KYC compliance requirements as a guide for what’s potentially to come.
“At first glance, regulating the crypto space would definitely help provide transparency,” said Mr Farah. “However, there are concerns that by making the crypto providers into obliged entities would make it cumbersome for them to conduct business, resulting in crypto businesses exiting the market due to the high cost of compliance. Specifically, implementing adequate AML and KYC measures might be too costly for some crypto entities. Both companies operating in the crypto industry and their users in that market are going to feel the difference if new regulations are strict in nature. That said, enterprises that pay enough attention to compliance will continue to thrive in Singapore.”
As of now, the possible strict measures that could possibly impede businesses are counterbalanced with an already existing support system, most of it revolving around the sandbox environment for financial institutions created by the local authorities.
The Monetary Authority of Singapore (MAS) has created a Regulatory Sandbox environment which enables “financial institutions and FinTech players to experiment with innovative financial products or services in a live environment but with a well-defined space and duration.” Depending on the individual case, MAS provides regulatory support by relaxing, for a period of time, some of its requirements.
Furthermore, Singaporean officials seemingly want to uphold the supportive crypto business environment as new laws that regulate various parts of the cryptocurrency environment will further incentivize the industry. This July, The Inland Revenue Authority of Singapore (IRAS) has introduced the initial version of the “Electronic Tax Guide” (the e-Tax Guide) regarding digital payments. This document is meant to establish the nature in which cryptocurrency transactions in Singapore will be taxed. The changes in taxing will come into effect on January 1st, 2020, with a key update being the fact that cryptocurrency transaction won’t be taxed the Singaporean Goods and Services Tax (GST).