Nature of Cryptocurrencies

What are the common ways crypto assets are used in Singapore?

According to MAS (Parliamentary Replies)
last revised on 5 April 2021

There are two common types of crypto assets. First, cryptocurrencies such as Bitcoin, which may be used for payment purposes. Second, securities tokens, which are digital representations of traditional securities such as shares and bonds. The risks posed by each type are different and so are our regulatory approaches.

Exchanges offering the trading of cryptocurrencies are regulated as digital payment token service providers under the Payment Services Act. Given their limited scale, these entities are regulated primarily for money laundering and terrorism financing risks. However, the Act provides MAS the powers to to impose additional measures on digital payment token service providers as needed.

As for securities tokens, they are subject to the same securities laws as traditional securities. Hence, an exchange that enables trading in securities tokens is regulated under the Securities and Futures Act and subject to the same rules, especially on fair, orderly and transparent trading, as any securities exchange. The size of the securities tokens market today is also small. Of more than 60 Recognised Market Operators currently regulated by MAS under the SFA, only three offer the trading of securities tokens, and with very small trading volumes. Recognised Market Operators are also not allowed to offer their products to retail investors.

According to MAS (Speeches)
last revised on 9 November 2021

...We define (crypto) tokens that are used for payments purposes as digital payment tokens, and entities which provide services related to such tokens in Singapore are subject to licensing and supervision by MAS, primarily for money laundering and terrorism financing risks.

...A potentially strong use case of crypto tokens is to facilitate cheaper and faster cross-border payments and trade finance.

Project Ubin has also served as a foundation for Project Dunbar – a blueprint for a multi-currency settlement platform that operates across countries using wholesale Central Bank Digital Currencies (CBDCs). Project Dunbar is a partnership among MAS, the Bank for International Settlements Innovation Hub, Reserve Bank of Australia, Bank Negara Malaysia, and South Africa Reserve Bank.  Commerical banks will be able to transact directly with one another using the wholesale CBDCs of their respective countries, eliminating the need for intermediaries and reducing the time and cost of cross-border transactions, if Project Dunbar succeeds.