Singapore has intensified its regulations against money laundering (AML) and the financing of terrorism (CFT) concerning exchange crypto, increasing the risk factor associated with these platforms.
This regulatory update aims to prevent criminal groups and terrorist organizations from exploiting the economic openness of Singapore, recognized as an international financial, commercial, and transportation hub.
With this move, Singapore strengthens its commitment to maintaining a safe and reliable financial environment. Let’s see all the details below.
Protecting the economy of Singapore as an international financial hub: news for crypto exchanges
As anticipated, on July 1st, the Monetary Authority of Singapore (MAS) published an update of the national risk assessment of terrorism financing (NRA) and the national strategy to counter terrorism financing.
In this update, the level of risk associated with crypto exchange platforms has increased from medium-low to medium-high.
The update of the regulations aims to prevent terrorist groups and organizations from exploiting the economic openness of Singapore, known as a financial, commercial, and international transport hub, for the purposes of terrorism financing.
Cross-border online payments remain classified as high risk, as they represent a potential channel for such illicit activities.
Implications for crypto platforms
This update represents a new challenge for the cryptocurrency platforms, coming just a few weeks after a report had already flagged digital payment tokens as high risk.
According to the national assessment of money laundering risk (MLNRA) of Singapore, digital payment token (DPT) service providers present significant risks and vulnerabilities in terms of anti-money laundering (AML).
The MAS, actively involved in the regulation of the digital asset market, has recently expanded the scope of regulated payment services to include digital token service providers.
This allows the MAS to impose stricter requirements in terms of AML and CFT, user protection, and financial stability. Thus also enabling DPTs to offer custody and transfer services for cryptocurrencies.
Singapore is considered a pro-crypto nation, with a cryptocurrency adoption rate of 11.2%, significantly higher than the global average of 4.2%.
According to the regulations of Singapore, digital currencies are classified as digital payment tokens, with Bitcoin and Ether (ETH) officially recognized and given a legal status in the country.
The Chinese AI startups focus on Singapore
Chinese AI startups are increasingly choosing Singapore as their new operational base to expand globally, raising concerns in China.
This movement is motivated by the need to escape the growing geopolitical tensions between China and the United States, which are hindering access to financing and advanced technologies.
The transfer to Singapore offers Chinese startups not only a wide range of markets, but also easier access to international financing, thanks to a more favorable regulatory environment.
A report by Bloomberg indicates that this strategy allows startups to avoid excessive scrutiny from countries that oppose China.
This phenomenon, known as “Singapore-washing”, helps companies to “disconnect” from their original Chinese roots.
A significant example is given by Wu Cunsong and Chen Binghui, founders of Tabcut. After starting their company in Hangzhou in 2022, they moved to Singapore in March 2023 to overcome the difficulties related to the limited venture capital in China.
Since they moved, Tabcut has had access to global clients and investments, as well as the latest technologies, such as Nvidia’s AI chips, currently restricted in China due to US sanctions.
Not by chance, the strict regulations prevent developers from exploring new innovations in the field of AI.
On the contrary, Singapore offers a more favorable environment, with ease of starting a business and acting as a bridge between Asian companies and global markets.
According to Adam, founder of Linklound, about 70-80% of Chinese software and artificial intelligence startups aim at a global audience. By the end of 2023, Singapore was home to over 1,100 artificial intelligence startups, many of which were of Chinese origin.
