The Monetary Authority of Singapore (MAS) — Singapore’s central bank and integrated financial regulator — works together with actors of the financial industry to develop and promote Singapore as a dynamic regional and international financial centre. As showed in the past, it generally has an open mind towards emerging technologies and thrives to understand the benefits that could potentially come with them.
Looking specifically at the blockchain technology and its application in the financial industry, Mr. Ravi Menon, Managing Director, MAS, outlines in a keynote interview: “[the crypto ecosystem] can unlock new economic value, enhance financial inclusion, and enable more seamless and efficient financial services. This is the greater vision that MAS is focused on.” Further, high potential is seen to advance cross-border payment transactions. Hence, MAS is part of Project Dunbar to explore how a common platform for multiple central bank digital currencies (CBDCs) could enable cheaper, faster and safer cross-border payments.
To capitalise on the identified benefits and realise its vision, MAS aims to enable innovation, while applying strong risk management measures, and thus follows a two-fold approach:
(i) Growing digital asset capabilities to establish a conducive environment for crypto related services to flourish in Singapore: This currently includes clarifying tax treatment, encouraging talent development, providing grants to bring innovation to Singapore and collaborating with industry partners to facilitate innovation as well as to gain further experiences regarding the benefits of the blockchain technology and the posed risks to inform potential regulatory amendments.
One concrete example is the MAS FinTech Regulatory Sandbox that enables financial institutions and FinTech players to experiment with innovative financial products and services in a live environment with MAS providing support by relaxing specific legal and regulatory requirements for the duration of the sandbox, which the entity otherwise would have been subject to. Another one is the newly launched Project Guardian, a collaboration between MAS and actors of the financial industry to explore the tokenisation of financial assets and to pilot respective use cases.
(ii) Managing the risks: In regards to the crypto ecosystem, MAS has identified four major risks towards which it takes a strong targeted risk management approach, namely money laundering and terrorism financing risks; technology and cyber risks; consumer protection; and financial stability risks. In general, regulations apply based on the purpose of the crypto based asset — an approach that many other countries follow as well: If a crypto based asset represents a security, it is regulated under the Securities and Futures Act, similar to other capital markets products, while if it is used for payment, it is regulated accordingly under the Payment Services Act. Further, on April 5th, 2022, the Parliament passed the Financial Services and Markets Bill (FSM Bill), which enhances MAS’ agility and effectiveness in addressing financial sector-wide risks, including blockchain and crypto based asset related risks.
Lastly, MAS takes a stringent approach towards consumer protection. It has warned the public against trading in cryptocurrencies and has earlier in 2022 issued Guidelines on Provision of Digital Payment Token Services to the Public to give effect to it’s expectation that Digital Payment Token (cryptocurrency) service providers should not promote their services to the general public in Singapore.
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