Written by: Lawyer Yang Qi
Stablecoins are being used by an increasing number of businesses for settlement, cross-border payments, fund management, and B2B payments. However, in Singapore, "using stablecoins for payments" is often not simply a product issue, but a complex undertaking involving regulatory boundaries, AML/CFT anti-money laundering, and technology risk management.
This article uses an "executable" approach to clearly explain the core path: first, explain your business model clearly, and then build up your licensing and compliance system, which can significantly reduce the risk of crossing the line and the subsequent rectification costs.
Note: This article is for general informational purposes only and does not constitute legal advice. The final compliance outcome depends on your trading process, client type, and the way funds/tokens are transferred and controlled.
First, take the most important step: "draw out" your business plan.
Before discussing specific implementation steps, please have the business leader write a one-page flow chart of funds/tokens, answering at least these questions:
- Who are your customers: individuals/merchants/businesses in a specific field or industry?
- Do you hold or control your clients' stablecoins (custody, private key control, multisignature permissions)?
- Do you use the frugal to stablecoin or stablecoin to stablecoin exchange method?
- Did you facilitate the transfer (A to B, merchant receiving payment, enterprise payment)?
- Are your clients located in Singapore or overseas? Do you "provide services to overseas clients from Singapore"?
- Are you a stablecoin issuer or do you only use third-party stablecoins (such as USDC/USDT)?
This page of Flow determines which regulatory activities you will trigger and what compliance system you need.
II. Licensing Assessment: Most stablecoin payments will fall within the PSA framework (and may also involve the FSMA).
In Singapore, stablecoin payment services typically fall under the regulatory scope of the Payment Services Act (PSA), particularly activities related to digital payment tokens (DPTs) services (such as transfers, exchanges, and custody). Additionally, providing digital token services from Singapore to overseas clients may trigger relevant requirements under the Financial Services and Markets Authority (FSMA).
Common business models and "potential regulatory triggers"
- Merchant payment collection + stablecoin settlement/clearing: often triggers DPT-related services; if it involves acquiring, transfer, cross-border remittance, etc., other PSA payment service types may also be added.
- Wallet/Escrow (You can access customer coins): This is often considered one of the high-risk trigger points (especially if you control the private key or have transfer permissions).
- OTC / Exchange / Matching: This usually triggers DPT-related services.
- Issuing your own stablecoin: How to trigger discussions on inclusion in the "issuer regulatory framework" with significantly higher compliance requirements.
Practical advice: Don't start with "What kind of license do I want to apply for?", but rather with "What regulated activities have I been doing?". Regulatory judgments always look at the substance of the transaction.
Third, if you want to issue a stablecoin: first decide whether you want to follow the "MAS-regulated stablecoin" path.
If you're not just using existing stablecoins, but planning to issue your own, the compliance path will be completely different. You'll typically need to meet much stricter requirements (such as reserve assets, redemption mechanisms, information disclosure, auditing, and operational risk control).
The conclusion is simple:
- Not issuing: The focus is on the compliance system of "DPT / payment service providers" (especially AML and technology risks).
- To issue: You need to make "reserve, redemption, audit, disclosure, and governance" institutional-level according to the issuer's framework.
IV. Compliance Pillar 1: Anti-Money Laundering (AML/CFT) (must be done like a financial institution)
In stablecoin/digital token-related businesses, **anti-money laundering and counter-terrorist financing (AML/CFT)** is the first area that regulators look at.
You must have at least the following "implementable" systems:
1) Company-level risk assessment (EWRA)
- Product risk, customer risk, regional risk, channel risk
- Which clients require enhanced due diligence (EDD)? Which must be rejected?
2) Customer due diligence (KYC/CDD/EDD)
- Identity recognition and verification, beneficial owner identification (such as enterprise customers).
- Sanctions and PEP Screening (Political Public Figures)
- High-risk trigger rules (e.g., anonymity, complex structure, sensitive regions, etc.)
3) Transaction monitoring and suspicious transaction handling (STR process)
- Monitoring rules/scenarios (e.g., frequent splitting, rapid entry and exit, abnormal address association, etc.)
- Case management and escalation mechanism: Who investigates, who approves, and how to preserve the chain of evidence?
- Employee training and annual review/independent audit
4) On-chain analytics/wallet risk assessment (strongly recommended as early as possible)
- Whether it is "legally mandatory" depends on the business model, but from a practical point of view, on-chain fund tracking and address risk assessment are becoming increasingly close to "industry standard practice", especially when you serve high-risk industries, do cross-border business, or provide custody/transfer functions.
V. Compliance Pillar 2: Marketing Compliance – Don't turn yourself into "encrypted advertising for the masses".
In Singapore, the promotion and marketing of digital token-related services are subject to clear regulatory scrutiny. Many teams fail not because of their products, but because of their "promotional methods": large-scale public marketing, exaggerating returns, downplaying risks, and manipulating public participation are all highly sensitive issues.
A more stable approach is usually:
- B2B preferred (merchants, businesses, institutions)
- The channels are becoming more "professional": industry conferences, closed-door meetings, partner referrals, and targeted content marketing.
- Clear risk disclosure: No downplaying, no "guaranteed profits," and no "principal protection."
In short: You can grow your user base, but you can't use "speculative narratives" to acquire new users.
VI. Compliance Pillar 3: Technology Risk, Managed Security, and Outsourcing Management (TRM + Outsourcing)
Stablecoin payment companies are a combination of "finance + software". Regulators will assess whether you possess institutional-level technology risk management capabilities, especially:
1) Wallet and Key Management
- Separation of permissions, approval mechanisms, multi-signature/tiered authorization
- End-to-end logging and auditability
- "Two-person review/multi-party authorization" for critical operations
2) Network security and incident response
- Vulnerability management, penetration testing, patch and configuration management
- Incident response plans and drills (tabletop exercise)
- Backup, recovery, and business continuity (BCP)
3) Supplier/Outsourcing Management (Extremely Important): You will likely outsource to cloud services, KYC vendors, on-chain analytics tools, wallet infrastructure, etc. Regulators will consider:
- Supplier due diligence and risk assessment
- Contract terms (audit rights, data protection, subcontracting restrictions, exit mechanism)
- Alternative options and contingency plans for key suppliers
VII. Compliance Pillar 4: Personal Data Protection (PDPA)
Whenever you conduct KYC (Know Your Customer) procedures and collect customer, transaction, or equipment information, you will be subject to Singapore's PDPA (Public-Private Partnership Agreement) obligations. It's recommended to start with two low-cost, high-return actions:
- Appoint a DPO (Data Protection Officer) and establish external communication channels.
- Create a data map: What is collected, what is its purpose, where is it stored, with whom is it shared, and how long is it retained?
VIII. Founder's Action Plan: Day 0 → Day 90
Day 0–15: First, clarify the boundaries.
- Draw a clear flow diagram of funds/tokens.
- Please clarify whether you are using escrow services, currency exchange, or account transfer, and whether your client is located in Singapore or overseas.
- Preliminary determination of "which regulated activities are triggered" has been completed.
Days 15–45: Building the Compliance Framework
- AML/CFT: Risk Assessment, CDD/EDD, Monitoring and STR Processes
- Technology risks: wallets/keys, security baselines, incident response
- Outsourcing Management: Supplier Due Diligence + Contract Terms + Exit Contingency Plan
- PDPA: DPO, Privacy Policy, Data Retention and Access Control
Days 45–90: Making Compliance "Operable"
- Launch screening and monitoring tools, and establish case management and record keeping systems.
- Complete employee training, compliance reporting mechanisms, and internal inspection mechanisms.
- Prepare a license/compliance package (governance structure, systems, architecture, processes, chain of evidence).
In conclusion: Compliance is not a "cost," but rather a threshold that determines whether you can grow and sustain your business in the long run.
Stablecoin payments can be fast, but compliance must be even faster. By mastering three key areas—regulatory boundaries, AML, and technological risks—your business will find it easier to secure institutional partnerships, pass due diligence, and withstand scrutiny in critical moments.
