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New Singapore law allows global crypto firms to expand locally

(PHOTO: REUTERS/Edgar Su)

By Chanyaporn Chanjaroen and Joanna Ossinger

(Bloomberg) -- Singapore introduced new payments legislation that offers global cryptocurrency firms a chance to expand their operations in the country by applying for operating licenses for the first time.

The Payment Services Act, which comes into force Tuesday, is the first comprehensive regulation for companies handling activities ranging from digital payments to trading of tokens such as Bitcoin and Ether. As well bringing crypto firms into the regulatory fold, the law will hand the Monetary Authority of Singapore formal supervisory powers for cyber security risks and controls on money laundering and terrorism financing.

The measure narrows the gap with Japan, currently a major Asian centre for cryptocurrency trading after 22 exchanges received licenses there since 2017. Increased investor interest in digital tokens has encouraged several regulators around the world to bring the venues under their scrutiny, especially for money laundering and other illicit activities.

The key advantage of Singapore’s new legislation is providing regulatory clarity on new types of payments activities such as e-wallets and cryptocurrency exchanges, according to Nizam Ismail, the founder and chief executive officer of Ethikom Consultancy, which helps potential applicants with licensing and compliance issues.

Tokyo-based crypto exchange operator Liquid Group Inc. and London-based Luno, which already operate in Singapore, are among the firms planning to apply for the licenses. “We welcome the Act with open arms,” said Liquid’s CEO Mike Kayamori. The firm will apply via its local Quoine Pte subsidiary.

The legislation “provides regulatory certainty to industry players but, more importantly, it provides consumers with a clear sense of the players they can trust,” said Luno’s Singapore general manager Sherry Goh. Luno obtained an operating license in Malaysia last year.

Twenty of the top 50 crypto exchanges are based in the Asia-Pacific region and accounted for about 40% of Bitcoin transactions in the first half of last year, according to Chainalysis data.

Binance Holdings Ltd., operator of one of the world’s largest crypto exchanges, has an office in Singapore and is backed by Vertex Venture Holdings Ltd., the venture capital arm of Singapore-based Temasek Holdings Pte. Kathy Zhu, a Binance spokeswoman, declined to comment on whether the firm will seek a Singapore license.

The new law will strengthen consumer protection and promote confidence in the use of electronic payments, the MAS said Tuesday in an emailed press release. “The activity-based and risk-focused regulatory structure allows rules to be applied proportionately and to be robust to changing business models,” said MAS Assistant Managing Director Loo Siew Yee.

© 2020 Bloomberg L.P.