Singapore Grants In-Principle Approval to Crypto Firms for Digital Asset Services
In a significant development, two cryptocurrency firms have recently secured in-principle approval (IPA) from the Monetary Authority of Singapore (MAS) to offer digital asset-related services in compliance with the regulatory requirements set forth by the watchdog.
Licensing Framework and Regulatory Oversight:
Under Singapore’s Payment Services Act, MAS exercises regulatory control over seven categories of payment services, encompassing account issuance, domestic and cross-border money transfers, merchant acquisition, e-money issuance, digital payment tokens, and money-changing services.
StraitsX Obtains Major Payment Institution License:
Singapore-headquartered StraitsX has obtained a major payment institution (MPI) license specifically for digital payment token services. Following this approval, StraitsX is poised to concentrate on the issuance of two single-currency pegged stablecoins (SCS) pegged at a 1-1 ratio to the Singapore dollar (XSGD) and the US dollar (XUSD), respectively.
Stablecoin Development and Regulatory Compliance:
Kenny Chan, Head of StraitsX, highlighted that the in-principle approval from MAS validates their adherence to the regulatory framework governing stablecoin issuance. He emphasized the potential of single-currency pegged stablecoins as credible and reliable mediums for innovative payment transactions, both domestically and internationally.
Use Cases and Innovations:
Chan pointed to the Purpose Bound Money (PBM) testing led by MAS as an illustration, underscoring the programmability and interoperability of stablecoin-powered payment solutions. These include use cases such as programmable rewards and escrow arrangements for online commerce.
Expert Commentary on Stablecoins:
Etelka Bogardi, Asia Head of Fintech and Financial Services Regulatory at Norton Rose Fulbright, acknowledged the significance of stablecoins in the digital asset ecosystem, serving as a bridge to the fiat leg of a transaction. She emphasized Singapore’s role as a frontrunner in stablecoin regulation, implementing important safeguards through reserve management and redemption mechanics requirements.
Upcoming Regulatory Framework for Stablecoins:
MAS is expected to introduce a dedicated regulatory framework for stablecoin-related issuance and intermediation activities under the Payment Services Act. This framework, anticipated to be finalized in August after a public consultation initiated in October 2022, aims to provide further clarity and guidelines.
XREX’s Cross-Border Payment Focus:
Taiwan-based XREX, specializing in blockchain-based cross-border payment technology, received approval for six service categories, excluding money-changing services, for its Singapore entity. The team plans to utilize XREX Singapore as its Asia Pacific (APAC) headquarters, expanding its payment product supporting fiats, stablecoins, and cryptocurrencies in the region.
Regulatory Landscape and Global Expansion:
Christopher Chye, CEO at XREX Singapore, acknowledged the rigorous two-year approval process, considering it a hard-fought achievement. He highlighted blockchain technology’s potential to reduce transaction fees, enable atomic settlement, and facilitate programmable money. Additionally, he expressed optimism about regulatory developments across various jurisdictions and the attention central banks are giving to the blockchain industry.
The in-principle approval granted by MAS to these crypto firms marks a significant step in aligning digital asset services with regulatory frameworks. As Singapore positions itself as a trusted hub for global business, the forthcoming regulatory framework for stablecoins is poised to provide clarity and confidence to users and foster the continued development of the blockchain industry.