19 ASIAN LEGAL BUSINESS – JUNE 2023 WWW.LEGALBUSINESSONLINE.COM CRYPTO The key comments received have been related to retail access to licensed VATPs, token admission criteria, insurance/compensation arrangements, AML, and counter-financing of terrorism (CFT) matters, and transitional arrangements. “The SFC will carry out further consultation regarding virtual asset derivatives and will publish further guidance on the dual-licensing regime,” adds Mui. Paul Li, Co-Director of PolyU and Cybaverse Academy Joint Lab on Law and Web3, tells ALB that the VASP licensing regime only addresses VA exchanges, and there are still quite some other new species in the crypto world where “we need new regulations.” Man anticipates further regulatory moves to implement a stablecoinspecific regulatory regime. The Hong Kong Monetary Authority (HKMA) has issued a discussion paper, saying that only license-holding companies will be able to issue stablecoins and offer crossborder payments. And there are many other legal issues to resolve, including the registration issue for a DAO to be a legal entity, the intellectual property (IP) rights of NFTs, and commercial disputes issues when there is no legal contract in decentralised finance, Li notes. Kavi Harilela, business director of Payment Asia, an electronic payment solutions provider in Hong Kong, also thinks traders are still waiting for the HKMA to give clearer guidance. “The HKMA recently released a circular urging banks to support legitimate cryptocurrency businesses. The document emphasises the necessity for banks to provide access to financial services for these firms while maintaining a riskbased approach to anti-money laundering initiatives,” says Harilela. Still, it will take time for more financial products to be developed and more institutions to get involved in crypto. SUPPORTIVE SINGAPORE Singapore’s approach to cryptocurrency regulation is supportive, but also includes aggressive measures to protect consumers and prevent illegal activities. Singapore has been known for being one of the most crypto-friendly countries in the world, with a regulatory approach that is generally seen as balanced and supportive of innovation in the industry. In Singapore, cryptocurrencies are not considered legal tender, but they are recognised as a form of payment and are subject to regulation by the Monetary Authority of Singapore (MAS). The MAS has taken a progressive approach to regulating cryptocurrencies, recognising their potential benefits while also seeking to mitigate their associated risks. The MAS’s managing director Ravi Menon says the authority’s strategies aim to promote innovative and responsible digital asset activities. “If a crypto hub is about experimenting with programmable money, applying digital assets for use cases, or tokenising financial assets to increase efficiency and reduce risk in financial transactions, yes, we want to be a crypto hub,” Menon said in his opening address at the Singapore Fintech Festival 2022. However, the city-state does not want to be a “hub” for trading and embrace retail investors, probably to avoid risks. “If it (a hub) is about trading and speculating in cryptocurrencies, that is not the kind of crypto hub we want to be,” said Menon. Therefore, Singapore tries to avoid excessive risk for retail investors. As a result, Binance, the world’s largest digital assets exchange, withdrew its licensing application to operate an exchange in Singapore after failing to gain regulatory approval in December 2021. Singapore authorities do not ban retail access to cryptocurrency, but they have been discouraging the public from investing in the space. For example, earlier in 2022, Singapore banned promoting cryptocurrency activities in public services, including train stations. “Innovation and regulation are not incapable of coexisting. We do not split the difference by being less stringent in our regulation or being less facilitative of innovation,” Menon said in a speech at a fintech conference in August 2022. For VASPs, Singapore’s approach is similar to both Hong Kong and Japan. Under the Payment Services Act (PSA), crypto businesses that conduct activities such as buying, selling or facilitating the exchange of cryptocurrencies are required to be licensed by the MAS and comply with AML and CFT requirements. Further, the Financial Services and Markets (FSM) Bill passed in April 2022 regulates VASPs created in Singapore but only offers overseas services for AML/CFT purposes. In addition to the regulatory framework for payment services, Singapore has established a FinTech Regulatory Sandbox for fintech startups, including those working on blockchain and cryptocurrency solutions. The sandbox allows companies to test their products and services in a controlled environment with regulatory oversight, which can help them to refine their offerings and navigate the regulatory landscape. Crypto-relative regulations are expected to be stringent in Singapore. “The regulatory approach is always market specific. The differences in regulatory approach can make it more difficult for a crypto business to scale up an offering in Asia, as there is not always a onesize-fits-all solution that can be offered in all of the potential markets without any change,” Man of Baker McKenzie says. “The HKMA recently released a circular urging banks to support legitimate cryptocurrency businesses. The document emphasises the necessity for banks to provide access to financial services for these firms while maintaining a risk-based approach to anti-money laundering initiatives.” — Kavi Harilela, Payment Asia