Key Takeaways
- Crypto exchanges called Digital Payment Token service providers have moved from the Medium-Low to the Medium-High risk category.
- Cross-border online payments are considered highly risky as they are identified as a potential new channel to indulge in terror financing.
The Monetary Authority of Singapore (MAS) has heightened the risk classification for cryptocurrency exchange platforms from medium-low to medium-high under an update to the nation’s Terrorism Financing (TF) laws.
The updated classification is part of Singapore’s revised Terrorism Financing National Risk Assessment (NRA) and National Strategy for Countering the Financing of Terrorism (CFT). These measures are designed to prevent terrorist groups from exploiting Singapore’s status as a global financial, business, and transport hub.
The MAS’s latest move comes on the heels of a recent report that flagged digital payment tokens as high-risk. According to Singapore’s updated Money Laundering National Risk Assessment (MLNRA), digital payment token service providers pose serious risks and vulnerabilities concerning Anti-Money Laundering (AML) efforts.
Under the new TF update, Digital Payment Token (DPT) service providers have been elevated to medium-high risk. This change underscores the increasing scrutiny and regulatory measures aimed at mitigating potential threats. Meanwhile, cross-border online payments continue to be classified as high-risk, and identified as a potential channel for TF activities.
MAS highlighted the necessity of this update to strengthen Singapore’s defences against terrorism financing. The goal is to ensure that the country’s economic openness does not inadvertently facilitate TF activities. The regulator’s actions aim to enhance the robustness of the financial system and safeguard national security.
This development is part of a broader strategy to address AML and CFT challenges. The enhanced risk classification will likely lead to more stringent compliance requirements for DPT service providers, ensuring they adhere to robust AML and CFT standards.
The regulatory authority of Singapore has been making active efforts to regulate the crypto space for quite some time. In April 2024, MAS introduced crypto-related amendments to the Payment Services Act, focusing on DPT service providers. Under the regulations, users’ digital assets held in trust must be segregated from the assets of the service provider, though it stops short of mandating the use of an external custodian.
Last year, Singapore’s central bank released a stablecoin framework requiring issuers to meet certain stability and redemption requirements
