The Consultation Paper issued by the Monetary Authority of Singapore (MAS) outlines the proposed regulatory approach and requirements for Digital Token Service Providers (DTSPs), as mandated by the Financial Services and Markets Act (FSM Act) 2022.
Key Points of the Paper:
1. Regulatory Framework: The FSM Act focuses on regulating entities offering digital token services (such as cryptocurrency exchanges) outside Singapore but are incorporated or have a place of business in Singapore. This aims to reduce risks such as money laundering and terrorist financing (ML/TF), which are more pronounced due to the digital and cross-border nature of these services.
2. Licensing Requirements:
MAS will adopt a cautious approach to licensing, only approving applicants that can demonstrate the economic rationale of providing services outside Singapore and meet international compliance standards. Applicants must have sufficient capital, an executive resident in Singapore, and robust compliance measures.
3. Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) Standards:
Licensees must adopt AML/CFT measures, including Customer Due Diligence (CDD), transaction monitoring, and reporting suspicious transactions.
Enhanced requirements are applied for higher-risk activities, such as using anonymity-enhancing technologies.
4. Compliance and Risk Management:
DTSPs must establish strong compliance, audit, and governance frameworks to ensure regulatory compliance. They are expected to maintain technology and cybersecurity resilience, with reporting requirements for suspicious activities and system malfunctions.
5. Reporting and Technology Risk Management:
Regular reporting to MAS on transaction volumes, client details, and the use of anonymity technologies is required. Stringent technology risk management guidelines are also laid out to ensure operational integrity and cybersecurity.
6. Third-Party Reliance:
DTSPs can rely on third parties for CDD only if the third party complies with AML/CFT standards, and MAS excludes reliance on certain entities, such as licensed payment services providers.
7. Conduct and Disclosure:
DTSPs must ensure transparency in their business conduct and disclose the risks associated with their services to customers. Additionally, firms are required to correct false or misleading claims about their regulatory status.
Conclusion:
The paper reflects MAS's efforts to safeguard Singapore’s financial system by ensuring that entities offering digital token services comply with strict regulatory, AML, and cybersecurity standards, even when operating outside of Singapore.
#Blockchain #DigitalAssets #Regulation
Jigsaw Law Shashi Prakash Jha Kumar Aniket Aritra Sarkhel Siddharth Praveen Acharya
