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Singapore Financial Bill to Extend MAS Powers and Tighten Crypto Rules

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Singapore’s significant Financial Services and Markets (FSM) Bill has been approved by the country’s parliament. The bill is set to expand the powers of the Monetary Authority of Singapore (MAS) and address regulatory weaknesses in the cryptoasset space. 

It marks the latest development in Singapore’s measures to become a global crypto hub while setting out stringent regulations to address previous legislative gaps.

Key components of the bill include enhanced powers for MAS to regulate crypto firms – both through a stronger enforcement framework and the consolidation of its existing powers.

It also focuses on ensuring MAS can “address regulatory challenges presented by the digitalization and transformation of the financial market.” 

In January 2022, MAS issued guidelines to discourage cryptocurrency trading by the general public, advising digital token (DT) service providers not to promote their services to Singaporeans through marketing or advertising.

“MAS has observed that some DT service providers have been actively promoting their services through online and physical advertisements or through the provision of physical automated teller machines (ATM) in public areas. This could encourage consumers to trade DPTs on impulse, without fully understanding the attendant risks,” it warned.

In a statement introducing the bill, government minister Alvin Tan highlighted the risks associated with existing regulatory gaps: “Digital token service providers could easily structure their businesses to evade regulation in any one jurisdiction, as they operate mainly online. 

“We could be exposed to reputational risks brought by DT service providers created in Singapore, and which provide services relating to virtual assets such as Bitcoin outside Singapore. The FSM Bill seeks to mitigate such risks by licensing these players and imposing AML/CFT requirements on them,” he said.

 

There are four specific pillars to the FSM Bill:

  • Harmonized and expanded prohibition orders (PO) powers

MAS will be given broader powers to issue prohibition orders “against persons who have shown themselves to be unfit to perform key roles, activities, and functions in the financial industry.” 

Current loopholes mean MAS can only stop individuals carrying out key regulated activities, and not someone providing payment, risk management, or compliance services. The FSM Bill broadens these categories and widens the scope to cover functions critical to the integrity and functioning of FIs, in alignment with similar PO powers in Australia, Hong Kong, the UK, and the US. 

  • Enhanced regulation of DT service providers for ML/TF risks

While Singapore has already strengthened its standards for DT service providers in line with FATF recommendations this closes a loophole that enables DT providers created in Singapore but not operating in the city-state, to operate unregulated for anti-money laundering and combating the financing of terrorism (AML/CFT). 

DT service providers will now be regulated “as a new class of FIs” with the bill introducing licensing requirements and powers to conduct AML/CFT inspections. MAS says AML/CFT requirements will align with those imposed on digital payment token service providers under the Payment Services Act

  • Harmonized technology risk management (TRM) requirements

The Bill consolidates existing TRM requirements, enabling MAS to impose them on any FI or class of FI. Current maximum penalties for breaching TRM requirements “are not commensurate with the potential widespread impact to FIs’ customers and the financial industry that could result from such breaches.” 

Penalties will now rise to up to $1m per breach, higher for a serious cyber attack or disruption to an essential financial service. MAS will also be able to make FIs set aside additional regulatory capital until it is satisfied that adequate TRM measures have been put in place.

  • Statutory protection from liability for mediators, adjudicators, and employees of operators of approved dispute resolution schemes

The fourth key aspect of the bill is designed to strengthen the confidence and autonomy of those resolving financial disputes and align the level of protection they receive with international standards. 

Compliance staff operating in Singapore – or working for firms licensed in the country – should familiarize themselves with the new bill (a helpful explanatory brief can be found here), ensuring they fully understand the likely changes to MAS’ scope. Firms should also evaluate how their risk-based approach to AML/CFT may need to be revised when the bill becomes law. 

Find out more about cryptocurrency regulations around the world with our global guide.

Singapore’s significant Financial Services and Markets (FSM) Bill has been approved by the country's parliament. The bill is set to expand the powers of the Monetary Authority of Singapore (MAS) and address regulatory weaknesses in the cryptoasset space.  It marks the latest development in Singapore’s measures to become a global crypto hub while setting out stringent regulations to address previous legislative gaps. Key components of the bill include enhanced powers for MAS to regulate crypto firms - both through a stronger enforcement framework and the consolidation of its existing powers. It also focuses on ensuring MAS can “address regulatory challenges presented by the digitalization and transformation of the financial market.”  In January 2022, MAS issued guidelines to discourage cryptocurrency trading by the general public, advising digital token (DT) service providers not to promote their services to Singaporeans through marketing or advertising. “MAS has observed that some DT service providers have been actively promoting their services through online and physical advertisements or through the provision of physical automated teller machines (ATM) in public areas. This could encourage consumers to trade DPTs on impulse, without fully understanding the attendant risks,” it warned. In a statement introducing the bill, government minister Alvin Tan highlighted the risks associated with existing regulatory gaps: “Digital token service providers could easily structure their businesses to evade regulation in any one jurisdiction, as they operate mainly online.  “We could be exposed to reputational risks brought by DT service providers created in Singapore, and which provide services relating to virtual assets such as Bitcoin outside Singapore. The FSM Bill seeks to mitigate such risks by licensing these players and imposing AML/CFT requirements on them,” he said.   There are four specific pillars to the FSM Bill:
  • Harmonized and expanded prohibition orders (PO) powers
MAS will be given broader powers to issue prohibition orders “against persons who have shown themselves to be unfit to perform key roles, activities, and functions in the financial industry.”  Current loopholes mean MAS can only stop individuals carrying out key regulated activities, and not someone providing payment, risk management, or compliance services. The FSM Bill broadens these categories and widens the scope to cover functions critical to the integrity and functioning of FIs, in alignment with similar PO powers in Australia, Hong Kong, the UK, and the US. 
  • Enhanced regulation of DT service providers for ML/TF risks
While Singapore has already strengthened its standards for DT service providers in line with FATF recommendations this closes a loophole that enables DT providers created in Singapore but not operating in the city-state, to operate unregulated for anti-money laundering and combating the financing of terrorism (AML/CFT).  DT service providers will now be regulated “as a new class of FIs” with the bill introducing licensing requirements and powers to conduct AML/CFT inspections. MAS says AML/CFT requirements will align with those imposed on digital payment token service providers under the Payment Services Act
  • Harmonized technology risk management (TRM) requirements
The Bill consolidates existing TRM requirements, enabling MAS to impose them on any FI or class of FI. Current maximum penalties for breaching TRM requirements “are not commensurate with the potential widespread impact to FIs’ customers and the financial industry that could result from such breaches.”  Penalties will now rise to up to $1m per breach, higher for a serious cyber attack or disruption to an essential financial service. MAS will also be able to make FIs set aside additional regulatory capital until it is satisfied that adequate TRM measures have been put in place.
  • Statutory protection from liability for mediators, adjudicators, and employees of operators of approved dispute resolution schemes
The fourth key aspect of the bill is designed to strengthen the confidence and autonomy of those resolving financial disputes and align the level of protection they receive with international standards.  Compliance staff operating in Singapore - or working for firms licensed in the country - should familiarize themselves with the new bill (a helpful explanatory brief can be found here), ensuring they fully understand the likely changes to MAS’ scope. Firms should also evaluate how their risk-based approach to AML/CFT may need to be revised when the bill becomes law.  Find out more about cryptocurrency regulations around the world with our global guide.

Originally published April 14, 2022, updated May 6, 2022

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