Is Singapore, a crypto paradise, highly regulated? Inventory of license types, 5 Singapore-compliant exchanges | Security comparison

Where to check whether an exchange is licensed in Singapore: Monetary Authority of Singapore (MAS) website

Singapore’s virtual assets are under the responsibility of the Monetary Authority of Singapore, which is able to exercise the powers of the central bank locally and is also responsible for supervising financial institutions.

On the website of the Monetary Authority, you can find all relevant licenses for local financial institutions including banks, investment advisory, insurance, cryptocurrency, etc. In Singapore, the cryptocurrency license type is "Digital Payment Token Service". In addition to directly entering the local registered company name of the exchange you want to query, you can also click Payment > Standard Payment Institution > Digital Payment Token on the website. Service and Payment > Major Payment Institution > Digital Payment Token Service to find out which companies are currently licensed.

According to the author's actual search, there are currently only 14 companies including exchanges, blockchain consultants and blockchain solutions holding DPT digital payment licenses.

What cryptocurrency-related licenses are there in Singapore: SPI, MPI

Under Singapore’s regulatory framework, after the amendments to the Payment Services Act came into effect in January 2020, all traditional payment services, such as account opening, remittance, currency exchange, and emerging payment services such as electronic money (eMoney) issuance services and payment token (Digital Payment Token) services must comply with the "Payment Services Act" as a guideline.

Among them, cryptocurrencies such as Bitcoin and Ethereum are explicitly classified within the scope of DPT. Therefore, if an exchange wants to provide services such as the purchase and sale of cryptocurrencies, legal currency exchange, currency exchange, transaction matching, fund custody, wallet management, etc. , all need to hold a DPT license .

Among them, license types are distinguished based on monthly transaction volume. Companies with an average monthly transaction volume of less than 3 million Singapore dollars (SGD) need to hold an SPI (Standard Payment Institution License); companies with an average monthly transaction volume of more than 3 million Singapore dollars (SGD) need to hold an SPI (Standard Payment Institution License). There is MPI (Major Payment Institution License) .

To put it simply, an exchange that claims to operate compliantly in Singapore must obtain at least one of the MPI and SPI licenses. If it does not have any DPT license, it is operating without a license.

Which exchanges in Singapore currently have DPT licenses: only six, Coinbase, Crypto.com, Independent Reserve, Blockchain.com, Sparrow, Coinhako

According to actual information provided by the Monetary Authority of Singapore, among the 14 licensed companies, in addition to the two stablecoin issuing companies Circle and PAXOS, there are only six: Crypto.com , Independent Reserve , Blockchain.com , Sparrow and Coinhako , and Coinbase, which has just received a license from Retengteng , are exchanges. That is to say, currently only the above six exchanges are under official supervision and operate in compliance with regulations in Singapore.

Are other exchanges in Singapore illegal? The application may be pending but the exemption qualification for a specific period has expired.

After the Payment Services Act was enacted that year, the Singapore government granted all companies that had started providing exchange services before January 2020 a half-year exemption period. Even if they have not yet obtained a license, they can continue to provide cryptocurrency within these 6 months. Related services were provided until a license was obtained, but this qualification expired on July 28, 2020.

However, due to the strict application threshold and difficulty in obtaining a license, only 14 companies have passed out of more than 600 payment service license applications in the past two years. Therefore, some exchanges such as Binance have chosen to withdraw from the Singapore market, or It continues to be in a gray state of non-compliant operations.

Where can I find out which exchanges are applying for licenses in Singapore?

Singapore currently does not publicly provide a list of exchanges that are applying. It will only publish and update the information on the website of the Monetary Authority after the license is issued. The general public cannot check the application status of exchanges that have not yet been licensed.

What are the risks of using an unlicensed exchange in Singapore: there is no official risk control in advance, and asset security is not guaranteed.

To obtain a DPT license, you must pass a strict review mechanism. Based on the actual number of applications and licenses obtained, the chance of obtaining a compliance license may not exceed 2.5% .

In addition to a comprehensive investigation of the registered company, confirmation of financial capabilities (minimum capital amount is 100,000 SDG), and passing anti-money laundering procedures, annual trading account audits and annual fees are required to continue to maintain the license. At least one person must be designated at the place of business or registered office to deal with any questions or complaints from consumers.

Recently, the Singapore government has also imposed stricter requirements on exchanges, requiring exchanges to complete the following by 2023:

• Keep client assets separate from their own assets and held in trust

• Protect client funds

• Perform daily reconciliations of client assets and maintain appropriate books and records

• Maintain operation and control of Singapore users’ virtual assets

• Ensure that the hosting unit is operationally independent from other business units

• Clearly disclose to clients the assets held by DPT service providers and the risks involved

Although the Hong Kong Monetary Authority does not directly supervise the operation of exchanges, licensed exchanges are equivalent to passing the government's various levels of review in terms of economic capabilities and credit security, and are required to hand over user funds to bank statutory trusts to achieve asset separation. , and also ensure that exchanges, whether local or offshore, must have a physical presence in the local area to solve problems related to users and exchanges.

Generally speaking, although users using unlicensed exchanges will not face criminal risks, due to the lack of prior and continuous regulatory review after obtaining a license, they must bear the hidden concern that unlicensed exchanges may misappropriate assets or even make off with money.

Singapore’s strict anti-money laundering (AML) mechanism: KYT (Know your Token) mechanism

In order to cooperate with the FATF International Financial Action Task Force on Money Laundering, in addition to the common KYC real-name registration, most compliance exchanges in Singapore also need to have a KYT (Know your Token) mechanism, that is, to control any transfers made by users. The source of the exchange’s tokens is whether it is an asset that has been registered as stolen, or whether it is suspicious funds that have been held by some illegal institutions and participated in money laundering cases.

If it is traced that there may be a problem with the security of the token, the exchange has the right to freeze the transfer, require users to submit further information, and even notify the local government of the investigation to reduce the risk of exchanges and users receiving black money.

How to ensure the security of Singapore Exchange without a license?

Holding a DPT license only means that the exchange can provide cryptocurrency services in Singapore, but the official cannot guarantee the operating status of the exchange through the license. Therefore, although a license is an important criterion for the security of an exchange, users should still check the credit transparency and fund reserve status of the exchange through other mechanisms before choosing an exchange.

In the cryptocurrency market, compared to traditional financial products such as stocks and futures, we can learn more about the ratings and data of exchanges through the technical characteristics of blockchain. In this article, a must-read exchange security guide for beginners , we tell you in detail how to use the five steps including license inspection: exchange comprehensive score , ROR asset reserve certificate , user security fund , local compliance licenses , and user account security mechanism , to further choose a relatively safe exchange.

Comprehensive security comparison of licensed exchanges in Singapore

Further reading

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A must-read exchange security guide for newbies | 5 steps to ensure that your exchange will not let your funds escape!

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