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Singapore Payment Services Act Now in Effect For Crypto Firms

Cryptocurrency firms in Singapore must now operate in compliance with the Payment Services Act which came into effect on Jan. 28.

The new legislation requires cryptocurrency providers and exchanges to be licensed under some of the same regulatory elements as traditional financial service providers. In addition, crypto firms must also comply with the Financial Advisers Act, Insurance Act, Securities and Futures Act and the Trust Companies Act.

MAS New Rules

According to a press release published on Jan. 28, the new rules place cryptocurrency firms under the oversight of the Monetary Authority of Singapore (MAS).

Loo Siew Yee, Assistant Managing Director, MAS said in the release, “The Payment Services Act provides a forward-looking and flexible regulatory framework for the payments industry. The activity-based and risk-focused regulatory structure allows rules to be applied proportionately and to be robust to changing business models. The PS Act will facilitate growth and innovation while mitigating risk and fostering confidence in our payments landscape.”

Standard Operating Licenses

Essentially, the new regulations require, cryptocurrency and digital asset providers to apply for standard operating licenses that traditional financial firms would also be required to obtain, these include—standard payments institution license; money-changing license and a major payment institution license.

The press release stated that applying these standards to the emerging digital asset services will, “enhance the regulatory framework for payment services in Singapore, strengthen consumer protection and promote confidence in the use of e-payments.”

Image via Shutterstock

Crypto & the FATF Travel Rule: FinCEN Suggests Challenges in Governance, Not Technology

The Financial Action Task Force (FATF) Travel Rule has been in the center of attention lately, which concerns crypto transactions above a certain amount must be accompanied by identifying information.

The rule is an update to the existing FATF Recommendation 16, regarding cross-border and domestic wire transfers, and is intended to address the anti-money laundering (AML) and counter-terrorist financing (CFT) challenges as crypto adoption increases. The FATF Travel Rule could mean implications for virtual asset service providers (VASPs), including cryptocurrency exchanges, wallet providers, and custodians.

Financial institutions in the FATF member states are recommended to implement the new regulations by June 2020, a year after it was adopted by the FATF in June 2019.

The FATF has started observing digital assets in 2014, and defining certain terms has always been a challenge for the task force. As Amy Davine Kim, the Chief Policy Officer at the Chamber of Digital Commerce explained at Consensus: Distributed explained, there are still ongoing concerns regarding cybersecurity and privacy concerns over the travel rule.

Since the COVID-19 pandemic emerged, the Financial Crimes Enforcement Network (FinCEN) has published advisories on March 16 and April 3, to warn financial institutions to stay alert for malicious fraudulent transactions, and AML operations during the COVID-19 pandemic. This was due to the increase in these types of cases, as bad actors have leveraged the pandemic for theft and money laundering activities.

The FinCEN has taken a technology-neutral approach so far, as the network has seen the most challenges relating to governance and processes, rather than technology.

Kenneth Blanco, Director of the FinCEN stated, “the FinCEN also plans to publish multiple advisories highlighting common typologies used in pervasive fraud, theft, and money laundering activities related to the pandemic to better help the financial sector to better protect, and report this activity.”

Blanco also added that the FinCEN has observed that cybercriminals predominantly launder their proceeds and purchase the tools to conduct malicious activities via virtual currency. He said, “During this time of crisis where our people are more at risk or more vulnerable than ever, we, all of us, have a duty and responsibility to use our abilities, tools, and talents to protect others and ensure the stability of this ecosystem that we are creating and it depends on trust.”

Blanco concluded,

“We encourage the virtual currency sector to continue collaborative efforts to develop and implement these solutions and to keep FinCEN apprised their progress, including to participate in FinCEN’s innovation hours program.”

Coinbase recently revealed that the company has become a banking client of JP Morgan’s, impacting the future outlook of cryptocurrency exchanges and banking relationships.

Regarding the news, Jeff Horowitz, the Chief Compliance Officer at Coinbase said the company is focusing on analytics and transaction monitoring systems as banks will want to see these features in the crypto ecosystem. While he is pleased to see JP Morgan and other banks getting into the space, he said he hopes to see solutions for lower barriers to entry, as well as the solutions to comply with the travel rule do not come from a money-making perspective.

He further suggested that a “regulated” VASP has not been defined globally, and the industry must work to decide a framework regionally, then work on going global.

Adam White, Chief Operating Officer at Bakkt said, “We’re going to see a bifurcation in the crypto space, we’re going to see white crypto, and we’re going to see grey crypto, and the different forms of crypto will most likely trade for different prices. Offshore unregulated exchanges that aren’t complying with the travel rule, their assets will be traded at different prices.”

Crypto & the FATF: ING Develops Travel Rule Protocol for Tracking Crypto Transfers Ahead of FATF Plenary Meeting

The FATF has a wide range of recommendations, a total of 40 to ensure regulatory alignment between the compliance imposed on financial institutions and the regulations in its member states. The FATF Travel Rule is Recommendation 16, which has received a lot of attention from the crypto industry, especially virtual asset service providers (VASPs).

The Travel Rule requires crypto transactions above a certain amount to be accompanied by identifying information. The rule requires these financial institutions to collect, disclose, and transfer information including names, addresses, and account numbers to be able to identify the originators and beneficiaries of the financial transactions.

The requirement of disclosing identifying information of the persons involved in financial transactions becomes an irony for cryptocurrency transactions — known for its anonymity and privacy features. Travel Rule requirements have raised concerns within the crypto ecosystem as it goes against the ethos of digital cash like privacy when transferring cryptocurrencies.

Financial institutions in the FATF member states are recommended to implement the new regulations by June 2020, a year after it was adopted by the FATF in June 2019. June 2020 is a significant month for the Travel Rule as their efforts will be reviewed at FATF’s plenary meeting, scheduled for June 24, 2020.

Around 90% of non-VASP activity will eventually pass through a VASP at some point or is required to make contact with a system connected to a VASP. With the implementation of the FATF Travel Rule, some parties may find themselves moving their crypto-related activities to unregulated or underregulated markets, which could mean riskier VASPs.

Netherlands-based ING Bank has recently developed a new protocol to assist crypto exchanges and companies dealing in digital assets to adhere to the Financial Action Task Force’s Travel Rule requirements.

The new solution, the Travel Rule Protocol (TRP), developed by ING is also backed by Standard Chartered Bank, Fidelity Digital Assets, and Bitgo, and other firms in the crypto industry.

A source close to ING allegedly said that ING is not currently looking at dealing in cryptocurrencies, but will be focusing on security tokens and similar products.

Although ING does not seem like it is joining the crypto ecosystem, ING is no stranger to blockchain. ING is one of the founding members of Contour, a blockchain-based trade finance platform built on R3 Corda.

Singapore Passes Law to Regulate VASPs Operating Abroad

Virtual Assets Service Providers (VASPs) that originate from Singapore but offer their business offerings or products abroad are now required to secure licensing from the relevant authorities, a shift in position that may soon become law as the country’s Parliament has passed the Financial Services and Markets Bill on Tuesday.

As reported by Bloomberg, the new bill is deemed essential in curtailing all avenues by which crypto-hinged trading platforms will be a conduit for Anti-Money Laundering (AML) offences.

“Virtual asset service providers created in Singapore that provide services only elsewhere are unregulated for anti-money laundering and countering the financing of terrorism (AML/CFT), which creates reputational risks for the Republic,” said Monetary Authority of Singapore (MAS) board member Alvin Tan.

Singapore’s approach to supporting the growing digital currency ecosystem is multi-faceted. While the country’s regulators believe in the revolutionary potentials of these nascent asset classes and the technologies powering them, a great deal of caution is being exercised as it does the hard work of cautiously picking the companies it grants its licenses.

While some financial institutions like the Amber Group and DBS bank have enjoyed an excellent regulatory regime to operate in Singapore, mainstream players like Binance have had to pull out of the race for a license to operate in the country with the almost unending waiting process. In the MAS’s defence, the average investor who engages with the crypto space must be protected, hence the essence of the due diligence it takes in issuing licenses to apply to crypto platforms.

The recently passed bill also seeks to curb the incident of hacks and data breaches on protocols linked to Singaporean regulators. Per the new provision, a maximum fine of S$1 million ($737,050) can now be imposed on financial institutions, presumably, crypto-based firms, if they experience cyberattacks or their services are disrupted.

Philippines Central Bank to Suspend Issuing Licenses to New Virtual Asset Service Firms

The Bangko Sentral ng Pilipinas, the Central bank of the Philippines, announced on Thursday that it would close the regular application window for new virtual asset services providers (VASP) licenses for a period of three years beginning September 1.

VASPs are firms that offer certain services associated with virtual assets or cryptocurrencies such as Bitcoin.

The Philippine Central Bank said it reached the move because it wants “to strike a balance between promoting innovation in the financial sector and ensuring that associated risks remain within manageable levels.”

The regulator stated it would conduct a reassessment based on market developments. In other words, the strategic change would enable the watchdog to monitor the performance of current market players and the risks they pose to the financial industry. The agency further said the move would allow it to assess the impacts of existing digital asset providers concerning the country’s financial inclusion and digital payments transformation objectives.

The Bangko Sentral said that central bank-supervised institutions that intend to expand offerings to virtual-asset services like custody may still apply for a license.

The regulator stated that all applications that have completed stage 2 of the bank’s licensing process by August 31 August would be processed and assessed as normal.

The agency noted that applications with incomplete requirements would be returned and considered closed.

The central bank will no longer accept new applications starting September 1.

Virtual Assets on The Rise

At the end of June, the Philippine Central Bank approved 16 new virtual asset services providers to operate in the local markets.

In December last year, the regulator reminded the public to transact only with central bank-registered Virtual Asset Service Providers (VASPs) as transactions involving digital assets continued to rise rapidly.

The agency advised the public to be vigilant in their dealings involving VAs, which are not considered legal tender and not insured by the Philippine Deposit Insurance Corporation.

The regulator further mentioned that registered VASPs are mandated to comply with regulations that promote operational soundness and provision of quality services and ensure appropriate consumer protection.

As of June 2021, virtual currency transactions in the Philippines reached 19.88 million, an increase of 362% from the 4.31 million recorded in the previous year. Such transactions translated to P105.93 billion in value, an increase of 71% from P62.12 billion over the same period.

Hong Kong to Unveil Virtual Assets-Related Policy Statement on Upcoming Fintech Week

The Hong Kong Special Administrative Region’s government will release the plans for the development of virtual assets in the city during the upcoming FinTech Week by the end of the month.

In a blog post published by Financial Secretary Paul Chan Mo-po on Sunday, the policy statement will consist of the government’s “vision and strategy, regulatory regime, attitude towards opening up investors’ access to virtual assets, and the technological advantages brought by virtual assets launch pilot projects.”

The annual Hong Kong FinTech Week will be held from October 31st to November 4th, with the theme of “Breaking the Boundaries and Creating Extraordinary”. “The policy statement will clearly express the government’s position, demonstrate to the global industry our vision to develop Hong Kong into an international virtual asset centre, and our commitment and determination to explore financial innovation with the global asset industry,” the blog post stated.

Alongside the traditional fintech events, similar to last year, Hong Kong FinTech Week will also host the third-generation Internet (Web3), the Metaverse and other concepts to add new elements.

“A first-come, first-served basis, in the form of non-fungible tokens (NFT) to distribute limited quantities to participants version of the Proof of Attendance Protocol (POAP) token,” will be part of the blockchain attraction for the annual fintech event.

Owners of these NFT tokens will gain access to creating their personal avatars through 3D scanning, according to the blog post. It further added that token owners “will be able to use the tokens to participate in other industry events preferentially in the future.”

Development of virtual assets in Hong Kong

In terms of recent developments in the virtual assets sector in Hong Kong, Hashkeys Group and OSL Digital Securities Limited (OSL) have secured Type 1 SFC-licensed to deal with security. Type 1 license also empowers OSL to serve investors in Hong Kong through private security token offerings (STOs).

Previously, Blockchain.News reported that the China-based cryptocurrency exchange is the first regulated digital assets brokerage firm in Hong Kong to facilitate sales of new asset-backed digital tokens classed as securities to global institutions.

OSL has been doing that for a while. So far, its institutional clients include the likes of Animoca Brands, Head & Shoulders Financial Group, China Fortune Financial Group Limited, Volmart, and Monmonkey Group Asset Management Limited.

OSL first received approval in principle from Hong Kong’s Securities and Futures Commission (SFC) in August 2020, to license the cryptocurrency firm.

Meanwhile, the government has also actively begun introducing security measures against illegal acts conducted through virtual assets and blockchain technology.

The government has announced the framework of a new regulatory regime for virtual assets and associated products and services. The new framework for virtual asset service providers (VASPs) has been designed primarily to combat money laundering and terrorist financing risks. It is scheduled to take effect on 1 January 2023.

The key highlight of the new security measure is that the VASP regulatory regime consists of new licensing and regulatory requirements for VASPs’ operations.

According to the Financial Services and the Treasury Bureau, the licensing requirements of the new VASP regime are highly specialised and technical.

In response to the announcement of the framework of a new regulatory regime, Mayer Brown – a Chicago-based global white-shoe law firm – said, “Hong Kong’s new VASP regime is a recent addition to this space and it will be interesting to see the extent to which, if at all, the new regime impacts the growth of the VA industry in Hong Kong.”

Hong Kong to Propose Statutory Licensing Regime for VASPs: CE John Lee

Chief Executive of HKSAR John Lee delivered his first policy address Wednesday, indicating that the administration has proposed a bill to establish a statutory licensing regime for virtual asset service providers.

In his first policy address to the Legislative Council, John Lee, the leader of Hong Kong, who took over the authority in July as the successor of Carrie Lam, expressed his stance towards virtual assets regulation and the outlook as well as the development in terms of digital Hong Kong dollars, according to the latest published policy address.

Speaking of virtual assets among various issues, Lee said:

“On virtual assets, the Government has introduced a bill to propose establishing a statutory licensing regime for virtual asset service providers. The Hong Kong Monetary Authority (HKMA) is examining market feedback on the regulation of stablecoins and will ensure that the regulatory regime is in line with both the international regulatory recommendations and the local context.”

Currently, only one licensed virtual asset trading platform, OSL, is listed on the Securities and Futures Commission (SFC) as of August 2022; while another private company, Hashkey Group, secured Approval-in-Principle in April to operate a licensed virtual asset trading platform from the SFC in Hong Kong, which received type 9 asset management license by SFC of Hong Kong in September, enabling them to manage a portfolio of virtual assets fully.

Michel Lee, Executive President of HashKey Group, spoke to Blockchain.News after the policy address, saying that “we expect the government to set out additional licensing regimes to entice more digital asset companies and firms to apply for SFC’s licences and become regulated players in Hong Kong.”

“These policies should in turn make Hong Kong the market-of-choice for these Web3 and blockchain-facilitated technology companies for legal and compliant capital and liquidity markets for their underlying economies.”

The Executive President added that the local blockchain community and market participants have been looking forward to a clearer regulatory framework on virtual assets in the city to regain its position as a major global virtual asset and Web3 hub, in the hope that to get it done by this year.

Previously, Lee’s deputy, Financial Secretary Paul Chan, disclosed to address the policy statement related to digital assets during the upcoming Fintech Week by the end of October.

Hong Kong remains struggling for the recovery and revival of the economy amid the pandemic of COVID-19, facing strong competitors regionally and globally as well. The city has joined other global countries to study the adoption of digital currency to boost the economy and its currency in the long term.

The policy address reads that the HKMA has also begun the preparatory work for issuing “e-HKD” and is collaborating with the Mainland institutions to expand the testing of “e-CNY” as a cross-boundary payment facility in Hong Kong.

Lee’s policy implementation comes after his speech in July, pledging to explore central bank digital currency in terms of retail level (rCBDC) and escalating the scenario for the application of mBridge initiative, a collaborative CBDC project between HKMA and the central banks of Thailand, China, the United Arab Emirates and the BIS to enhance multi-currency cross-border payments.

Over 600 Fintech companies in the city, according to statistics from the government.

The administration said “it is vigorously promoting Fintech by encouraging more Fintech services and products to undergo proof-of-concept trials, taking forward cross-boundary Fintech projects and nurturing Fintech talents.”

HashKey Group Secures Licenses from Regulator to Operate Virtual Asset Trading Platform

Hong Kong-based digital assets company Hash Blockchain Limited (HBL), a member of the HashKey Group, announced to secure regulatory approval from the Securities and Futures Commission of Hong Kong (SEC) to operate a virtual asset trading platform.

HashKey said the company now has received a Type 1 (dealing in securities) and a Type 7 (providing automated trading services) license, allowing them to provide automated trading services for cryptocurrencies such as Bitcoin and Ether, and stablecoins, security tokens, according to the statement.

Michel Lee, Executive President of HashKey Group, said he is delighted to receive the licenses, given the backdrop of this positive announcement.

“This enables us to provide regulated and compliant virtual asset trading services as we continue to help build the financial, technological and service infrastructure to facilitate and contribute to the rapid growth and the long-term development of the ecosystem.”

“Our objective is to build a platform that is best in class in terms of technology, security and trading experience for our clients,” Colin Zhong, CEO of HBL, also welcomed the latest regulatory approval from the authority, adding that “One of the focuses of HashKey’s virtual asset exchange will be on the tokenisation of non-traditional assets, leveraging the robust ecosystem HashKey has developed over the years.

The latest approval enables Hashkey group to get the green light not just to operate in Hong Kong but also from Japan and Singapore conditionally, which comes after another Hong Kong-based virtual assets platform OSL Exchange licensed virtual asset trading platforms in the city.

Recently, the HKSAR government published a policy statement supporting the city to develop virtual assets under a supervised regime, including the issuance of tokenised green bonds and the preparation of developing the digital Hong Kong Dollar. The administration’s move is considered to catch up with regional competitors like Singapore.

Image source: HashKey Group

Thai SEC Regulates Crypto Custody Providers

In an attempt to provide cryptocurrency investors a higher level of safety, the Securities and Exchange Commission (SEC) of Thailand is hard at work establishing new legislation for bitcoin custody services.

The Thai Securities and Exchange Commission (SEC) published new guidelines on January 17 that require virtual asset service providers (VASPs) to develop a digital wallet management system in order to guarantee the safekeeping of virtual assets.

The new restrictions are aimed at crypto custodians, also known as VASPs, which are companies that provide services linked to the secure storage of cryptocurrency.

The laws require the formulation of policy and guidelines for overseeing the risk management of digital wallets and private keys. These regulations demand for the development of policy and guidelines. In accordance with the rules, this is one of the three major conditions that must be fulfilled.

VASPs are obligated to communicate with authorities about such policies and offer action plans in order to be in compliance with the laws. This is necessary to ensure that VASPs are not breaking the law.

In addition, the SEC asked that cryptocurrency custodians explain their plans and procedures for establishing digital wallets and keys, as well as preserving and managing them.

The authority will also oblige crypto custodians to create backup plans in the event that the wallet management system is interrupted by unplanned incidents. This requirement will come into effect when the authority implements its wallet management system.

The period of time that has been allotted for cryptocurrency custodians to comply with the regulation’s requirements is six months, beginning on the day that it enters into effect.

The Securities and Exchange Commission of Thailand’s most recent crypto laws are in line with the authority’s objectives to enact more stringent crypto restrictions in the wake of industry failures like the collapse of the FTX. These objectives were established in response to the Securities and Exchange Commission of Thailand’s efforts to enact more stringent crypto restrictions.

Reports indicate that at the beginning of the month of January, the government opened a new investigation into a local cryptocurrency exchange known as Zipmex. The government is alleged to have stated that the company had been illegally offering services related to the administration of digital asset funds.

Crypto Lending Platform Sandbank Temporarily Suspends New Deposits and Investment Features in Response to Crypto Market Challenges

Sandbank, a leading crypto lending and investment platform, has announced its temporary suspension of new deposits and investment features in response to the challenges and uncertainties prevailing in the crypto market. The platform aims to ensure a secure environment for users to engage in their investment activities.

In recent times, numerous crypto companies have encountered serious challenges due to tightening regulations and inherent flaws in their business models. Just a few days ago, Delio and Haru Invest, two Korea-related crypto lender platforms, halted their withdrawal services. It is worth noting that Delio is a regulated entity holding both Korea’s Virtual Asset Service Provider (VASP) and the USA’s Money Services Business (MSB) licenses.

Despite the tumultuous climate, Sandbank claims to reassure its users by affirming the uninterrupted availability of its withdrawal and asset management functions. The platform remains committed to supporting its users in maintaining a healthy and prosperous crypto investment journey. Sandbank pledges to uphold the highest standards of service and will continue to assist customers throughout their investment endeavors.