Regulation
Singapore tightens anti-money laundering regulations for cryptocurrency exchanges
Singapore has strengthened its regulatory framework against money laundering and terrorist financing, particularly in the context of cryptocurrency exchanges.
This decision underlines the country’s commitment to preserving a safe and reliable financial ecosystem.
As part of this initiative, the Monetary Authority of Singapore (MAS) has updated its National Terrorist Financing Risk Assessment. The latest assessment raises the risk level of cryptocurrency exchanges from medium-low to medium-high. This is aimed at preventing criminal and terrorist entities from misusing Singapore’s open economy.
Under the revised regulations, cross-border online payments continue to be classified as high-risk, due to their potential to facilitate illicit activities. This update aims to enhance vigilance against the exploitation of Singapore’s status as an international financial, trade and transportation hub.
Impact on cryptocurrency platforms
This increased scrutiny represents a new challenge for cryptocurrency platforms, coming shortly after a previous report identified digital payment tokens as high-risk. The MAS’s updated national assessment on money laundering highlights the substantial risks associated with digital payment token (DPT) service providers.
In response, MAS has extended regulatory oversight of digital payment services to DPT providers. This extension allows for the imposition of stricter anti-money laundering (AML) and counter-terrorist financing (CFT) measures, ensuring user protection and financial stability. The regulation now allows DPTs to offer cryptocurrency custody and transfer services, reinforcing Singapore’s commitment to a secure financial sector.
Singapore has emerged as a key player in the global cryptocurrency ecosystem due to its progressive regulatory stance and favorable environment for fintech innovation. The country’s regulatory framework for digital assets is one of the most comprehensive in the world, which has attracted many cryptocurrency exchanges and fintech companies to set up shop in Singapore. This favorable environment has made Singapore an important hub for digital assets, fostering both innovation and regulatory compliance.
Despite tougher regulations, Singapore maintains its position as pro-cryptocurrency nationwith an above-average adoption rate of 11.2%, compared to 4.2% globally. In Singapore, digital currencies are recognized as digital payment tokens, with Bitcoin and Ether officially having legal status.
Chinese AI startups set up shop in Singapore amid geopolitical tensions
Meanwhile, Chinese AI startups are increasingly choosing Singapore as a base for their global expansion. The trend is driven by the need to circumvent escalating geopolitical tensions between China and the United States, which have limited access to funding and advanced technologies.
Relocating to Singapore allows these startups to access a larger market and easier international financing, facilitated by a more favorable regulatory environment. This strategy, often referred to as “Singapore-washing,” allows companies to detach themselves from their Chinese origins and escape the scrutiny of countries critical of China.
Singapore’s favorable business environment and strategic location as a bridge between Asian and global markets have made it an attractive destination for Chinese AI companies. As of the end of 2023, Singapore had over 1,100 AI startups, many of which originated from China, reflecting a significant shift in the global technology landscape.