December 14, 2023

Comprehensive Guide to Crypto Regulations and FATF Travel Rule in Singapore

Comprehensive Guide to Crypto Regulations and FATF Travel Rule in Singapore
  • Under Singapore's Payment Services Act, cryptocurrencies are recognized as digital payment tokens, requiring businesses to obtain a license to offer crypto services in the city-state.
  • In 2020, Singapore's Monetary Authority introduced a licensing system for crypto exchanges and wallet providers to align with anti-money laundering (AML) and CTF (counter-terrorist financing) regulations.
  • The crypto Travel Rule threshold in Singapore is SGD 1,500, yet certain information must still be shared for transactions below this value.

As crypto adoption continues to rise, Singapore is seeing growing traction, coming in at 2nd place in the Crypto Hubs 2023 list. The country plays a key role in crypto’s adoption in the Asia-Pacific region, which it strengthens through a focus on digital innovation, raising awareness of crypto usage, the absence of capital gains tax, the government’s close cooperation with industry stakeholders, and most importantly, favorable crypto regulation in Singapore.

According to Henley & Partners, Singapore leads as the top crypto hub across the world with a score of 50.2 out of 60, a reflection of its well-established crypto infrastructure and reputation for privacy and security. This standing in the global arena naturally leads to an interest in the specifics of its legal framework, particularly how Singapore applies the FATF Travel Rule in its burgeoning crypto sector.

So, let’s take a closer look at Singapore’s crypto law and the application of the FATF travel rule in the country!

Overview of Crypto Regulations in Singapore

In 2020, the country’s central bank, the Monetary Authority of Singapore (MAS), introduced a licensing system for crypto exchanges and wallet providers under the Payment Services Act (PSA). With this move, the agency ensured that crypto-related activities within the country adhere to anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.

Under this framework, cryptocurrencies are classified as digital payment tokens (DPTs), effectively making approved cryptocurrencies legal assets in Singapore and allowing them to be treated on par with other asset classes. 

The act stipulates that any business offering crypto services must obtain a payment institution license, which means having a registered office in Singapore.

The country’s financial regulatory body also incorporated cryptocurrencies under the Securities and Futures Act (SFA) in the same year. This move essentially categorized certain approved tokens as capital market products.

Singapore also mandates that cryptocurrency exchanges and other virtual asset service providers secure a capital market services (CMS) license for issuing digital tokens. With this requirement, the country is ensuring that these entities meet specific financial standards and maintain a clear demarcation between firms engaged in market-making activities and those focusing on developing blockchain-based innovations in the crypto space.

Click here to learn about the current state of global crypto regulations.

Specifics of the Singapore Crypto Travel Rule

The MAS published PSN02, also known as the Crypto Travel Rule Singapore, which came into force in January 2020 to address money laundering and terror financing risks. It is a part of Singapore’s broader cryptocurrency regulation framework, where MAS mandates that crypto service providers comply with the FATF’s Travel Rule to bolster the resilience of the country's financial system.

Notably, these rules don’t apply when transactions are between crypto service providers and non-custodial or self-hosted wallets.

However, according to the stipulations of the Crypto Travel Rule Singapore, VASPs are obligated to collect and share originator and beneficiary information with the beneficiary crypto service providers for all transactions, regardless of the amount involved. 

For transactions below or equal to SGD 1,500, the information required includes:

  • The name of the value transfer originator
  • The value transfer originator’s account number or unique transaction reference number
  • The name of the value transfer beneficiary
  • The value transfer beneficiary’s account number or unique transaction reference number

And when the crypto transaction amount exceeds S$1,500, a wider scope of information must be collated and shared. This includes:

  • Name of the transaction originator and their account number or unique transaction reference number
  • Originator’s address, date and place of birth, and a unique identification number, which can be a birth certificate number or passport number and an identity card number or the registration number in case it’s a business
  • Name of the beneficiary and their account number or unique transaction reference number
  • If it’s a legal entity, then its ultimate beneficiary owner (UBO) must be identified and verified.

Under Crypto Travel Rule Singapore, financial institutions, too, are required to implement a robust risk management system that includes:

  • Risk assessment and Risk mitigation
  • Customer due diligence (CDD)
  • Enhanced due diligence (EDD)
  • Sanctions list screening
  • Politically exposed persons (PEP) screening
  • Ongoing transaction monitoring
  • Reliance on third parties
  • Correspondent accounts and wire transfers
  • Audit, employee training, and internal policies
  • Record-keeping for at least five years
  • Compliance reporting, including suspicious transactions to MAS.

Is Crypto Legal in Singapore?

Yes, crypto is legal in Singapore and open to innovation through the Payment Services Act (PSA), which was passed in 2019.

This Act clarifies the legal status of crypto and governs a wide range of payment service companies, including account issuance, local and international money transfer services, e-money issuers, merchant acquisition, foreign exchange, and Digital Payment Token Services.

Companies dealing with crypto transmission, exchange, or storage are subject to the MAS regulatory control. And due to Singapore's strict crypto AML/CFT laws, VASPs need to register for a trading license and adhere to AML/CFT rules. 

Crypto Taxes in Singapore

Singapore is often regarded as a crypto tax haven for both individuals and businesses, primarily because it does not impose a capital gains tax on cryptocurrency investments. This policy facilitates favorable conditions for long-term crypto investments.

However, the tax scenario differs for those who engage in professional crypto trading. In such cases, profits from trading are treated as income from business activity and are, therefore, subject to income tax. This taxation applies irrespective of whether the trading is short-term or long-term as long as it is conducted in a professional capacity.

In instances where crypto trading is subject to income tax, losses incurred can be deducted for tax purposes, offering some relief in the event of a downturn in the market.

For businesses that accept cryptocurrencies as a form of payment, the value received is treated as income and is subject to income tax.

It's important to note that while transactions involving the purchase or sale of goods and services using cryptocurrencies are not subject to the standard 8% Goods and Services Tax (GST), the act of buying, selling, or converting cryptocurrencies is subject to GST on the fees involved in these transactions.

In terms of accounting for these transactions, Singapore typically employs methods such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Weighted Average, providing different approaches to calculating profits or losses for tax reporting.

Singapore Stablecoin Regulation

In Q3 of 2023, Singapore finalized the rules for stablecoins, which are payment tokens that maintain a constant value against one or more fiat currencies, to become one of the first jurisdictions globally to do so. 

These rules aim to “facilitate the use of stablecoins as a credible digital medium of exchange and as a bridge between the fiat and digital asset ecosystems.”

As per Singapore stablecoin regulation, some key requirements to ensure value stability at all times include;

  • Holding a minimum of 1 million Singapore dollars (SGD) in base capital
  • Stablecoin reserves must be held in low-risk and highly liquid assets
  • Reserves backing the stablecoin must be equal to or exceed the value of the stablecoin in circulation at all times
  • Stablecoin issuers must return the stablecoin’s par value to holders within five business days of a redemption request

Stablecoin issuers must provide “appropriate disclosures,” including value stabilizing mechanism and reserve audits to users.

These rules will apply to single‑currency stablecoins issued in the country and pegged to the local fiat currency, Singapore dollar (SGD), or any G10 currency, such as the USD. Stablecoins that fulfill these requirements will be recognized by the regulator as “MAS-regulated stablecoins,” distinguishing them from non-regulated tokens.

Concluding Thoughts

Singapore is one of the only countries in the world to provide a clear and robust legal framework for crypto assets. And when this regulatory clarity is combined with higher than average cryptocurrency ownership of 19%, it makes Singapore a prime location for dealing with cryptocurrencies. 

However, virtual asset service providers need to understand both the FATF Travel Rule and the broader crypto regulatory framework in Singapore in order to take full advantage of Singapore's crypto adoption, tax benefits, and regulatory support for blockchain and fintech innovation and thrive.

Frequently Asked Questions

Q1: What is the Payment Services Act in Singapore, and How Does It Affect Cryptocurrencies?

The Payment Services Act, enacted in Singapore in 2019 (often referred to as the PSA Act Singapore or simply the Singapore Payment Act), modernizes the regulatory framework for digital payment services, directly impacting cryptocurrency-related businesses. 

Q2: How Does Singapore's Monetary Authority Regulate Crypto Exchanges and Wallet Providers?

In 2020, the Monetary Authority of Singapore (MAS) mandated a licensing regime under the Payment Services Act specifically for crypto exchanges and wallet providers. This initiative, part of Singapore's crypto exchange regulation, ensures these entities comply with anti-money laundering (AML) and counter-terrorist financing (CTF) standards. Consequently, only MAS-approved crypto exchanges and wallet services that adhere to these regulations are permitted to operate in Singapore. 

Q3: What is the Crypto Travel Rule in Singapore, and What are its Thresholds?

The Crypto Travel Rule in Singapore is a regulatory measure for cryptocurrency transactions, in line with FATF Recommendation 16, which mandates the sharing of transaction information to prevent money laundering and terrorist financing. 

When a transaction exceeds SGD 1,500, detailed information about both the sender and recipient must be disclosed. This requirement, part of the broader Singapore Travel Rule Crypto regulations, is also applicable for transactions below this threshold. However, the information required is not that detailed, unlike when the transactions exceed SGD 1,500.

Q4: How are Cryptocurrencies Classified and Regulated Under Singapore's Laws?

Cryptocurrencies in Singapore are classified as digital payment tokens under the Payment Services Act and are included under the Securities and Futures Act. This classification allows them to be legally treated as assets, requiring businesses to comply with various regulatory requirements, including obtaining relevant licenses.

Q5: What Specific Requirements are Imposed on Crypto Transactions in Singapore Under the Travel Rule?

The MAS mandates the collection and sharing of detailed originator and beneficiary information for all crypto transactions, with more comprehensive data required for transactions exceeding SGD 1,500. This includes personal identification and account details.

Q6: Is Cryptocurrency Legal in Singapore, and What are the Regulatory Requirements?

Yes, cryptocurrency is legal in Singapore. The Payment Services Act governs crypto transactions, with businesses needing to register for a trading license and adhere to stringent AML/CFT laws.

Q7: What is the Singapore Stablecoin Regulation?

Singapore stablecoin regulation is established rules for stablecoins in the city-state. Its goal is to ensure that stablecoins maintain consistent value stability. The key requirements for stablecoin issuers include a minimum base capital, liquid asset reserves, and clear disclosures to users, among others.


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