Crypto entrepreneurs lured into Singapore by a clear openness to the growing industry are beginning to realize how difficult it is to work legally in a city-state.
Singapore strictens its regulations towards crypto licenses
The regulation of cryptocurrency in Singapore is primarily concerned with the introduction of improved standards for service providers associated with crypto assets. Views have been expressed around the world that a vibrant digital asset market is a potential haven for money-laundering and the financing of terrorism. Blockchain security studies conducted in 2020 show that 56% of digital currency services have weaknesses in KYC and AML controls. Therefore, regulators need to pay more attention to decentralized finance. Hence, the new FATF recommendations on Anti-Money Laundering/Combating the Financing of Terrorism (POD/FT) for digital assets.
Given that the regulation of cryptocurrency in Singapore is relatively high compared to many other jurisdictions, the government responded immediately to the new recommendations and drafted amendments to the PSA Payment Services Act, enacted in 2019. (entered into force in January 2020).
Key changes:
- Introduction of improved standards for virtual asset service providers
- The right of MAS to regulate market crypto participants who do not have their own cryptocurrencies
- Tighter control of proper implementation of AML/CTF rules with careful monitoring of transactions
- Improved consumer protection with risk notification
- Separation of clients’ assets from those of the service provider itself
In the government’s view, such regulation of cryptocurrency in Singapore would allow MAS to respond quickly and in a timely manner to all changes in the cryptocurrency industry, maintaining the stability of the state’s financial system. The monetary authority of a country is being extended to ensure effective fiscal policy and a high level of consumer protection.
Together with tighter enforcement of AML/CTF, the new legislation will allow MAS to exercise oversight not only over Singaporean crypto companies, but also globally over organizations that are based outside the jurisdiction and conduct cryptocurrency business. In addition, technology risk management requirements for financial institutions have been developed, as well as a dispute resolution procedure that provides crypto clients with an accessible way to resolve disputes.
Hence, here are the main disadvantages of starting crypto business in Singapore:
- In the light of recent legislative developments, Singapore is only suitable for certain platforms whose tokens are not securities.
- Expensive legal services.
- Strict AML-legislation. It is a set of measures to ensure the fight against illegal money trafficking and the financing of extremist organizations.
- The need to obtain a MAS license. This takes time and effort, registration implies a number of essential requirements.
Estonian jurisdiction has something to offer
Only one cryptocurrency license is required to legalize any crypto-activity in Estonia. This strengthens its position among the most preferred jurisdictions to launch a crypto-project.
Estonia is 99% digitalised, thereby offering unlimited opportunities to entrepreneurs. The favorable tax system, innovative e-Residency programme, fintech opportunities, advanced business ecosystem, rich talent pool— that’s just the beginning of what to expect from the Estonian business environment.
More and more people are entering the Estonian business market by investing in cryptocurrency, and it is undoubtedly worthwhile: the country welcomes every aspiring entrepreneur.
In less than 3 years, Estonia has issued more than 2,000 cryptocurrency licenses (400 active as of now), thereby strengthening its position among the most preferred jurisdictions for launching a blockchain project.
Globally, Estonia has been selected as a favorable ecosystem for building startups, offering a 0% income tax rate. In addition, it is necessary to take into account the following favorable characteristics of doing business in Estonia: minimal bureaucracy, digitisation of doing business, online company registration, and low administrative costs. Let us remind you that for a completely remote management of your company from anywhere in the world, you can use an electronic resident card.
The IT jurisdiction of Estonia is considered one of the most crypto-lenient of its kind (read our comparative analysis here) with facilitated conditions for obtaining a license for the exchange of cryptocurrency in the blockchain technology industry. In other words, the so-called single cryptocurrency license is an official permission to conduct a regulated cryptocurrency business in Estonia.
Many new cryptocurrency and trading platforms are created every day, and a significant part of them have received their license in Estonia, since the local order presupposes an easier process of obtaining a crypto-license, compared to the similar process in other countries.
Required documents for applying for a crypto-license in Estonia:
KYC/AML procedures must include the following documents:
- Identification of clients – requirements for the provision of documents, source of wealth, proof of address of residence.
- Means of verification of documents provided by clients.
- Verification of the validity of documents of individuals.
- Requirements for the storage of documents provided by clients.
Procedural rules should include the following documents:
- Compliance monitoring and internal audit
- Measures of diligence
- Obligations of notification
Risk assessment procedures should include the following documents:
- Determining the level of risk
- Classification of risks
- Nationality
- Procedure for controlling transactions
- Origin of funds
A Member of the company’s Board can apply for a cryptocurrency license in Estonia. An application for a license can be submitted electronically with an e-resident card, when visiting a notary in Tallinn, or by issuing a power of attorney to a representative of LKS Consult OÜ , so that our lawyer can submit the application for you.
The state fee for an application for a license is 3,300 EUR. The fee must be paid to the Estonian Ministry of Finance(FIU). The issue of a license is decided by the Rahapesu andmebüroo (RAB) within 60 working days after the application is submitted.
Taking into account the needs of customers from all over the world, LKS Consult OÜ has developed an all-in-one offer “Company & Crypto-License in Estonia”, which includes registration of an Estonian company plus all the necessary services for obtaining a single crypto-license.