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Hot off the heels of new financial services legislation, Singapore’s finance minister and chief of the Monetary Authority of Singapore (MAS) has responded to queries from lawmakers regarding crypto sanctions compliance and payment licence exemptions.
Much like its counterparts in Europe and the US, Singapore’s parliamentarians have addressed concerns regarding crypto being used to circumvent sanctions imposed on Russia following the invasion of Ukraine.
Singapore announced sanctions against Russia on March 5, which included the control of exports of military and technological goods to Russia and financial measures against Russian banks, entities and activities. This included sanctions against key Russian institutions such as VTB Bank, Promsvyazbank and Bank Rossiya.
This was an unprecedented move for the city-state, which has usually only sanctioned other countries in response to United Nations resolutions.
Saktiandi Supaat, a lawmaker sitting with the People’s Action Party, currently in government, asked whether, in light of the financial sanctions that have been imposed against Russia, if Singapore's regulation of crypto-assets and decentralised finance (DeFi) will prevent sanctioned individuals and companies from using non-traditional forms of finance to circumvent the sanctions.
And if not, whether the MAS is looking at introducing or revising the regulation of crypto-assets and DeFi shortly.
“MAS requires all FIs to ensure compliance with the measures, regardless of whether transactions are facilitated using traditional financial channels, or through cryptocurrency exchanges or decentralised finance protocols,” said Tharman Shanmugaratnam, the minister in charge of the MAS in response to Supaat.
To guard against circumvention, these financial measures specifically prohibit crypto-asset transactions that may be used to facilitate any prohibited activity or transaction, he continued. “In short, FIs will not enable sanctioned parties to use non-traditional forms of finance to bypass the measures.”
Meanwhile, another question from Chua Kheng Wee Louis, a member of the centre-left Workers’ Party, asked the government about the 2020 Payment Services Act and entities that have previously been granted an exemption from holding a licence under the law.
“What is the breakdown in the number of companies for those whose exemption ceased after the specified period, those that are rejected by MAS and those which [sic] applications are withdrawn?”
In addition, he asked: “What is the average length of time between the grant of exemption and eventual end of exemption?”
Shanmugaratnam responded that, as part of the transitional arrangements, entities that were engaged in regulated activities before the commencement of the Payment Services Act were exempted from holding a licence if they submitted a licence application before July 2020 for digital payment token (DPT) activities (Singapore’s legal definition for crypto-assets) or January 2021 for other regulated activities.
“The exemption from licensing remains in force until the applications are approved or rejected by the MAS or withdrawn by the applicant,” he pointed out.
Meanwhile, since the commencement of the legal act, the financial watchdog has received more than 580 licence applications, of which 415 had notified the MAS within the specified period and were exempted from licensing.
To date, 87 applications have been approved by the regulator, 11 have been rejected and 147 applications withdrawn after engagement with the MAS.
In addition, around 170 entities remain exempted from licensing as their applications are pending review.
“MAS closely scrutinises all applications to ensure the quality of the risk management systems and controls of the applicant,” said Shanmugaratnam. “Applications that are incomplete or unclear take longer to process. Entities may also withdraw their applications.”
