Singapore’s lawmakers have passed a bill to expand the financial market watchdog’s authority over the cryptocurrency sector. The legislators want the regulatory body empowered to introduce a tighter crypto regulatory framework within the country.
Singapore has been ranked among the few countries with a comprehensive crypto regulatory framework. The regulatory environment has also been ranked as too tough, prompting some crypto-based firms to leave Singapore’s market.
Singapore wants to tighten crypto regulations
The bill was passed on April 5, and it is the latest effort that Singapore has taken to tighten its oversight over the cryptocurrency sector. Despite the provisions of this bill and other crypto-related bills passed, Singapore maintains a positive stance regarding cryptocurrency regulations.
The legislation in question will mandate Singapore-based virtual asset service providers (VASPs) that only offer crypto services overseas to be licensed. Before this bill, crypto companies with headquarters in Singapore were not required to comply with anti-money laundering and anti-terrorism financing laws.
According to the state minister of trade in Singapore, Alvin Tan, the lack of such a regulation previously created a gap in crypto regulations. Tan noted that local companies solely conducting overseas operations presented a “reputational risk” to Singapore.
Tan noted there needed harmony, given that overseas companies that offered services in Singapore were required to abide by Singapore’s regulatory framework despite not having physical locations within the country.
The bill has been supported by most members of parliament. However, there are concerns that the requirement could lead to some VASPs being “double regulated.” They could also be subject to a different form of regulation in the countries where they are operating.
Some lawmakers have also argued that the bill fails to touch on the contentious issue of investor protection. Cryptocurrencies are high-risk assets, and licensing and regulating VASPs does not shield investors from this volatility.
The new bill will give the MAS authority to impose harsh penalties on the companies that fail to uphold high levels of security. The maximum penalty for a security breach is $740,000. The MAS will also have the authority to issue a prohibition order against an individual ranked unfit to conduct crucial roles and activities in the financial and cryptocurrency sectors.
Crypto regulations in Singapore
Singaporean lawmakers are committed to making the country a major hub for blockchain and crypto activities. The Financial Markets and Services Bill was introduced in February 2022. The bill seeks to boost digital token services in Singapore in compliance with the new standards launched by the Financial Action Task Forces (FATF).
The FATF is a global organization that fights financial assets’ use for money laundering and terrorism financing. The recommendations of the FATF have been mainly used as the basis for which countries have been formulating regulations for the cryptocurrency sector.
The Monetary Authority of Singapore (MAS) is tasked with regulating the cryptocurrency sector. The MAS has said that it would closely monitor the growing adoption of cryptocurrencies to assess if further regulations are needed for the sector.
Tan has also argued that regulating crypto businesses did not offer full protection to investors. He opined that investors would benefit more from education and awareness programs to be aware of the risks they are exposed to when they trade in cryptocurrencies.
In an interview with Business Times, Tan said, “The financial penalty, coupled with the flexibility to impose additional supervisory actions strike a balanced approach, signals the importance of having robust technology risk management, without being overly excessive for smaller financial institutions.
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