Singapore tightens AML rules for cryptocurrency exchanges

Singapore has strengthened its regulatory framework to combat money laundering and terrorism financing, especially in the context of cryptocurrency exchanges.

This step underlines the country’s commitment to maintaining a safe and reliable financial ecosystem.

As part of this initiative, the Monetary Authority of Singapore (MAS) has updated its national terrorism financing risk assessment. The latest assessment raises the risk level for cryptocurrency exchanges from medium-low to medium-high. This measure aims to prevent criminal and terrorist actors from misusing Singapore’s economic openness.

Under the revised rules, cross-border online payments are still classified as high risk due to their potential to facilitate illegal activities. The update aims to increase vigilance against exploitation of Singapore’s status as an international financial, trade and transportation centre.

Impact on cryptocurrency platforms

The increased scrutiny poses a new challenge to cryptocurrency platforms, coming shortly after a previous report identified digital payment tokens as high risk. MAS’s updated national assessment on money laundering highlights the significant risks associated with digital payment token (DPT) service providers.

In response, MAS expanded regulatory oversight of digital payment services to include DPT providers. This expansion enables the introduction of more stringent anti-money laundering (AML) and counter-terrorism financing (CFT) measures, ensuring user protection and financial stability. The regulations now allow DPTs to offer cryptocurrency deposit and transfer services, reinforcing Singapore’s commitment to a safe financial sector.

Singapore has emerged as a key player in the global cryptocurrency ecosystem due to its progressive regulatory stance and conducive environment for fintech innovation. The country’s regulatory framework for digital assets is among the most comprehensive in the world, which has attracted many cryptocurrency exchanges and fintech firms to set up shop in Singapore. This conducive environment has made Singapore a significant hub for digital assets, promoting both innovation and regulatory compliance.

Despite the tightening of regulations, Singapore has maintained its position as a cryptocurrency-friendly country, with an above-average adoption rate of 11.2% compared to the global rate of 4.2%. In Singapore, digital currencies are recognized as digital payment tokens, with Bitcoin and Ether having been given official legal status.

Chinese AI startups move to Singapore amid geopolitical tensions

Meanwhile, Chinese AI startups are increasingly turning to Singapore as a base for global expansion, a trend fueled by the need to circumvent rising geopolitical tensions between China and the U.S. that have limited access to financing and advanced technologies.

Moving to Singapore gives these startups broader market access and easier international financing, facilitated by a more favorable regulatory environment. This strategy, often referred to as “Singapore-washing,” allows companies to break away from their Chinese roots and avoid scrutiny from 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. By the end of 2023, Singapore was home to more than 1,100 AI startups, many of which originated in China, reflecting a significant shift in the global technology landscape.