Crypto license in Singapore
The revolutionizing blockchain technology is gradually winning over the governments and companies around the world. This holds not only for crypto-friendly Western countries, but for the Asian region as well. Asia is known as a very important area for cryptocurrency projects. Mining farms, big exchanges and many ICOs have found their home here. Singapore is among those countries that are willing to regulate cryptocurrency projects while being aware of the risks, associated with some of them.
Singapore has consolidated its position as one of the preferred fintech destinations for foreign investors around the world. It thanks to a favorable taxation system and a modern regulatory framework that covers a wide range of activities related to the financial industry.
One of the newest and most in-demand types of businesses is related to the cryptocurrency field in Singapore. These companies will be established in the fintech sector.
Registering a crypto exchange in Singapore should not be a problem if the requirements set by the regulator are met.
Working with cryptocurrencies in Singapore
Cryptocurrencies are legal in Singapore, but license on work with cryptocurrencies is required for ICOs and crypto exchanges. Traders are also required to obtain a crypto license to maintain professional activity. Apart from securities-related licenses, there is a financial adviser’s license which should be obtained by companies that provide advice on financial operations with tokens. In some cases, such companies must comply both with the SFA and the FAA (Financial Advisers Act), while in other cases only the FAA is relevant to them. A legal and financial advisor can help to determine which Act(s) your business must follow. It goes without saying that to obtain a crypto license, one must follow the guidelines of MAS on relevant matters.
Taxation of cryptocurrency projects in Singapore
Taxes in Singapore for cryptocurrency projects are considered mild and depend on the type of business as well as cash flow. If you receive revenue in cryptos, you should pay income tax that varies from 0% (if your income is below $20,000 per year) to 22% (if income is above $320,000 per year). Losses and capital gains are not taxable. The latter means that trading and long-term investment are treated differently in terms of taxation in Singapore. If you purchase cryptocurrencies and hold them, you do not have to pay taxes. If you trade them on regular basis, you do. It is also worth noting that according to some sources, if cryptos are used in gaming industry, they are tax-exempt in this country. To sum up, there is no taxation of cryptocurrencies as such, but income tax is applicable.
Operation of crypto exchanges in Singapore
Registering cryptocurrency exchange in Singapore requires a special license. As crypto exchange is mainly a platform for trading, it is regulated under the SFA along with other security exchanges. However, special attention should be paid to what is listed on a crypto exchange. If they are crypto tokens, then this exchange is regulated by the SFA. If, however, there are only cryptocurrencies, it is not subjected to regulation.
The main requirements to get a license for crypto exchange are that it must provide security for their users’ funds, prevent money laundering and financing of terrorism, keep track of transactions and report any suspicious activities.
While there is no KYC requirement for now, it is advised to request identification from customers to avoid fees for non-compliance with anti-money laundering and counter financing of terrorism requirements.
Apart from licenses related to securities, there also exist licenses for financial advisors in Singapore. However, as exchanges are usually not providing advice, financial licenses for crypto exchanges in Singapore are not required.
Launching an ICO in Singapore
Holding an ICO in Singapore used to be risky. MAS was against regulating such projects because of the risks associated with them. However, as popularity of crypto projects was growing, the Authority decided to publish guidelines for ICO regulation in Singapore.
According to them, if you want to launch an ICO, you need to comply with the SFA first. That means preventing fraudulent activities, securing funds of customers even if the issued tokens are not securities. Moreover, a license for blockchain project that in this case is called ‘capital markets services license’ must be obtained. Once all that is done, you can proceed with the ICO completely legally.
Cryptocurrency Regulation In Singapore
Regulation of cryptocurrency and blockchain projects in Singapore is done by the central bank MAS (Monetary Authority of Singapore). According to the managing director of MAS, this bank welcomes cryptocurrencies and regulates not them, but potentially risky activities that involve them. Even though MAS essentially performs most of crypto regulations in Singapore, it can only publish guidelines which are not legally binding.
“The contents of this guide are not exhaustive, have no legal effect and do not modify or supersede any applicable laws, regulations or requirements”. Nevertheless, MAS is officially recognized as the Authority on securities and exchanges.
While there is no crypto law in Singapore as such, a lot of projects, such as ICOs and crypto exchanges must comply with the Securities and Futures Act (SFA), since crypto tokens are often treated as securities in this country.
According to it, an exchange has to be approved and pay annual fees. Moreover, an exchange has the following obligations:
– To notify the Authority of any changes of the main information, related to its operation;
– To manage risks efficiently;
– To record transactions;
– To make reports to the Authority on regular basis;
– To assist the Authority when required;
– To be confidential about user information and employees, unless the Authority or order of court states otherwise.
If a company wants to start a cryptocurrency project in Singapore, apart from the obligations that were mentioned above, it also needs to have a specific administering structure, that includes a CEO, a Chairperson and the Board of Directors that must have at least four committees, responsible for appointments, auditing, resolution of conflicts and salaries respectively.
Challenges and Opportunities
In the recent years, Singapore has emerged as a global hub in technologies such as cryptocurrencies and blockchain. Simultaneously, the Monetary Authority of Singapore, has been taking steps to actively regulate cryptocurrency business in Singapore. In this piece, we look at the Singapore government’s attitude towards cryptocurrency businesses, the new cryptocurrency regulation and licensing regime, and the challenges and opportunities facing cryptocurrency businesses in Singapore.
Singapore Government’s attitude towards Cryptocurrency businesses
Singapore offers a balanced regulatory and legal environment for cryptocurrencies. The Monetary Authority of Singapore (MAS), Singapore’s financial regulatory body, believes in regulating the cryptocurrency ecosystem to monitor any risks associated with crypto activities, such as money laundering and terrorist financing, while also ensuring that it doesn’t stifle innovation.
The statement given by Singapore’s Deputy Prime Minister Tharman Shanmugaratnam in an interview, most accurately sums up Singapore’s attitude towards cryptocurrencies: “We will continue to encourage experiments in the blockchain space that may involve the use of cryptocurrencies. Some of these innovations could turn out to be economically or socially useful. But equally, we will stay alert to new risks.” In line with this, MAS has been working towards regulating cryptocurrency exchanges operating in Singapore.
Simultaneously, MAS has also issued warnings to investors and the public of the risks of investing in crypto products. Singapore has also been experimenting with blockchain technology for development of cryptocurrency and digital payments.
Legally, Singapore offers a neutral regime for the growth of transactions involving cryptocurrency. Singapore law is commonly used as the governing law in cryptocurrency related contracts because of its advanced dispute resolution laws, and a reputation for being an arbitral friendly and neutral regime. In addition, cryptocurrencies are legal in Singapore and therefore, any contract involving cryptocurrencies would not be considered illegal. This has been the main reason for Singapore to have emerged as the cryptocurrency hub in Asia.
New crypto regulation and licensing regime in Singapore
Payment Services Act, 2019
In January 2020, the Payment Services Act (PSA) came into effect to regulate traditional as well as cryptocurrency payments and exchanges. The intention behind introducing PSA was to streamline payment services under a single piece of legislation, and calibrate regulations according to the risks such activities pose by adopting a modular regulatory regime. The PSA provides a framework to obtain license to operate cryptocurrency business in Singapore and outlines money laundering compliances to be met by cryptocurrency operators.
Securities and Futures Act
MAS also made the Securities and Futures Act (SFA) applicable for public offerings or issues of digital tokens and in May 2020, released a new Guide to Digital Token Offerings. Offers or issues of digital tokens to the public (Offer) will be regulated by MAS if the digital tokens are “capital market products”. Capital market products under the SFA include securities, units in a collective investment scheme, derivatives contracts and spot foreign exchange contracts for purposes of leveraged foreign exchange trading. MAS will determine whether a digital token, its characteristics and the rights attached to it, is a type of capital markets products.
Proposed Omnibus Act for the financial sector by MAS
In July 2020, MAS proposed the introduction of a new set of regulations to govern the financial sector in Singapore, which will also have impact on the cryptocurrency industry. The intention behind the proposed regulations is to protect Singaporeans from unsuitable entities who can increase the risk associated with crypto businesses and to clamp down on financial crime in the crypto ecosystem. MAS mainly intends to introduce new provisions for putting in place the following:
(1) A harmonized and expanded power to issue orders
(2) A new Part to regulate virtual asset service providers for AML/CFT
(3) A harmonised power to impose requirements on technology risk management
(4) Providing mediators, adjudicators and employees of an operator of an approved dispute resolution scheme with statutory protection from liability
Licensing Criteria and Procedures for Applying for Singapore Crypto License Setup
– At least one shareholder (can also be a legal person, no nationality restriction or residency restrictions)
– At least one director (only natural person, at least one must be Singapore resident/holder of Singapore work pass)
– Beneficial owners’ details – Not part of public record (a new regulation requiring to disclose BO’s is expected)
– Shareholders’ details – Part of public record
– Directors’ details – Part of public record
Taxation – Corporate tax rate – 0%
Income sourced from within Singapore – 17% (standard local corporate tax rate)
Accounting requirements – Submission of annual financial statements is required
Audit – Required
Secretary – Registered Secretary is required
Registered office – Required
Registered Agent – Required
Resident Director – Required
– Language: Any
– Letters: From Roman alphabet
– Company name must end with such suffixes or their abbreviations: Limited
In order to obtain a license, the following steps will be carried out
– The client provides required documents for preliminary review assessment
– If structure and officers of a proposed company are confirmed, Atrium Legal Lab proceeds with incorporation of a Singapore company
– Upon receipt of corporate documents, Atrium Legal Lab proceeds with bank account opening
– If applied for Atrium Legal Lab services it is possible to receive a professional assistance with preparation of business plan, relevant policies and manuals (based on factual information provided by the client)
– Atrium Legal Lab proceeds with lodging a license application to MAS
– Upon receipt of any comments from MAS, Atrium Legal Lab either replies, or amends the application accordingly until the final decision from MAS
In order to obtain license, Atrium Legal Lab will fill all necessary application forms and also acquire apostilled corporate documents.
A notarized copy of valid passport
A notarized copy of a 2nd ID
A copy of proof of residential address (ex. utility bill that is not older than 3 months) in English or translated into English
A notarized copy of Criminal Record
A notarized copy of a Letter of Reference form Bank, saying that the authorized person has a private account and that it is in good standing
Detailed CV dated and signed by the applicant
2 Character Reference Letters issued by professionals
Certified Diplomas of Higher Education
Signed and notarized application forms
If documents are not in English language or language of particular country, then they must be accompanied by a notarized translation.
Please ensure that notarization is in English language if not then please provide with notarized English translation.
Every Shareholder, Director or Executive Officer of the company-applicant must be fit and proper to hold that position.
Additional documents may be requested by the regulatory authority or local Bank at any point to certify specific information.