As the world economy looks to advancing interest in cryptocurrency and its utility, investors are looking for places where they can safely park their money. Singapore is one of the latest countries that have implemented new regulations. In the light of recent development, a lot of questions have been raised. Should you look for the payment license in Singapore? Will it work for cryptocurrency companies? Is the reputation of the license enough for investors? These are just some of the questions that we will tackle in this article.
Payment Services Act was brought into effect from January 2020 in Singapore. This law has allowed businesses dealing with cryptocurrency to operate freely in Singapore. It has also helped attract dozens of new companies to the country. How is it beneficial for businesses? In the sections that follow, we shall take a closer look into the regulation and examine the advantages and disadvantages of this new law.
The conclusive evidence points to the numerous benefits of procuring the SPI or MPI license in Singapore. The flexible regulation, minimal licensing fees, and super low taxes are all great advantages that you get with a license in Singapore, however, your company needs to have a watertight AML framework in place. Businesses must comply with the government. If you are still unsure about the license, many webinars dissect the new regulations’ many merits and demerits.
Payment License in Singapore – Types of Licenses
The special license required as per the Payment Services Act is split into three groups:
Payment license in Singapore – Type 1. The license for money-changing services: This is meant for businesses that solely deal in the purchase and sale of any foreign currency.
Payment license in Singapore – Type 2. The license for Standard Payment Institution or SPI: This license permits companies to conduct any service, including cryptocurrency operations. Nonetheless, there are limitations within this license, which are:
S$3m (approximately $2.2m) limit for a single payment service provider. This limit is for a single month. (This excludes any form of issuing from an account for digital currency and services that involve currency change);
S$6m (approximately $4.4m) limit, if there are more than two payment services. This limit is for a single month. (This excludes any form of issuing from an account for digital currency and services that involve currency change);
S$5m (approximately $3.7m) in daily outstanding digital currency.
Payment license in Singapore – Type 3. The license for Major Payment Institution or MPI: This license affords the same services that the SPI provides, however, it is for businesses that operate on a much larger scale and whose transactions exceed the limits set by the SPI.
The size of the company determines what kind of license they should pursue.
How to Obtain Payment License in Singapore
By now you will have concluded that acquiring a license for cryptocurrency in Singapore is a great idea. However, you might be wondering about the requirements and the rigidity of the said requirements. To acquire the license the company needs to have a Singapore registration, even if it is a foreign business. While it may seem like a tedious task, company registration in Singapore can be relatively easy. You only need a few things, which are the company’s constitution, directors’ and shareholders’ information, minimum S$1 paid-up capital and the address where the company is registered. Additional fees include the registration fee for the company, which is S$300 (approximately $220), as well as the S$15 (approximately $11) approval fee for the name. To get a new license, you will have to start applying online. In the application process, the company is required to state the kind of service it wishes to provide.
Business activity: The license requires that the company have a permanent or registered office in Singapore. The headquarters can be anywhere, only an office that has been registered as a branch will suffice.
Local native as director: The license requires that one of the executive directors on the board of your company be a permanent resident or a citizen of Singapore. Rather, you can also receive the license if a director, a non-executive one, is a permanent resident or a citizen, and an executive director obtains the Employment Pass.
An Employment Pass is a document that allows foreigners to work or conduct their business in Singapore. The individual has to have an executive or managerial job in the country. The minimum salary requirement of the job is $3900 a month, which is more than the average of $3200.
The license does not infringe on the running of the company and companies can have multiple non-executive and executive directors as part of the board. The executive directors can run the day-to-day operations, whereas a non-executive director can provide oversight.
Capital: The SPI license’s minimum requirement is S$100000 (approximately $73k) and for MPI license, the amount increases to S$250000 (approximately $128k).
Documents: apart from application forms, businesses and companies are required to submit financial statements, business profiles, and the anti-money laundering compliance program. The second page of the checklist contains the entire list of documents required.
When applying, the company is required to have enforced the KYC and AML procedures. Many companies can assist you with due diligence checks, to ensure that companies have complied with all the regulations.
For companies that wish to deal in cryptocurrency, they are required to furnish the entire list of digital assets and tokens they plan to offer. They must also submit a risk assessment of token services, which is backed by legal tender.
Application fee: Minimum fee for an SPI is S$1000 (approximately $735) and MPI licenses have a minimum fee of S$1500 (approximately $1100). Annual fee: Companies have to pay S$10000 ($7330) for the MPI license and S$5000 (approximately $3670) for the SPI license.
These fees are not fixed. They can change as per the number of digital payment services that a company wishes to offer. To clarify, if a company wants an SPI for providing only a DPTS, the application fee is S$1000, and the license fee is S$5000. However, if the company wishes to offer numerous services, the fees will multiply.
Benefits of Payment License in Singapore
It is no secret that the new regulation for cryptocurrency has put the spotlight on Singapore. Over five hundred companies have applied for the license. Here are some of the reasons why the number of applicants keeps growing:
A rising economy: It is a known fact that Singapore is Southeast Asia’s financial hub and how it thrives on innovation. To attract investors and businesses, the MAS, which regulates finance in the country, is credited with creating a nurturing environment for companies in the fintech sector.
Pro-crypto environment: Singapore is one of the few countries that are pro cryptocurrency. The new laws come with flexible regulation and the low fees that come with acquiring licenses are attractive to payment service providers.
Forbearing tax system: The government of Singapore does not tax any income that is generated outside the country. The income tax is a low 8.5% if it is less than S$300000 (approximately $220k) and it rises to 17% for amounts above S$300000.
Zero Corruption: Singapore is a country that prides itself on being anti-corruption and their jurisdiction, which is technology-first, makes them a very respectable financial hub.
While the sheer advantages of the license seem to be very compelling, it also comes with a few disadvantages. Customers that utilize the payment service cannot directly use their digital currency accounts to withdraw cash nor can they swap their digital currency with Singapore Dollars. In addition customers have a hard limit of S$5000 that they can store in their electronic wallets. They also cannot transfer a sum greater than S$30000 in a year.
Useful information
The new regulation was created to help companies that deal with digital currency and payment. The idea was to create a legal and binding framework and the services were split into different groups.
Digital payment tokens;
Digital currency-issuing;
Domestic money transfers;
Foreign money transfers;
Merchant services;
Account issuing;
Money-changing services.
Cryptocurrency-based businesses will be interested in one particular service; the DPTS or Digital Payment Token Services. This service was introduced by the Government of Singapore. This particular service covers virtually everything that has to do with cryptocurrency. The service clarifies the working of cryptocurrency, which includes laws around the:
Buying;
Selling;
Exchanging;
Depositing;
Transferring.
The Payment Services Act also helps companies get a license if they wish to be involved in providing this type of payment service.
We, at Private Financial Services have experience in setting up Payment structures all around the world. Our portfolio of licensing includes the following countries: Payment license in Singapore, EMI in the UK, EMI in Lithuania, EMI in Malta, EMI in Estonia, EMI in Cyprus, EMI in Belgium, MSO in Hong Kong.
We will take care of all matters: analysis of your business model and country selection, formation of the legal entity, assistance with banks, preparation of all internal policies and procedures, assistance with business plan and program of operations, compliance, assistance with third party providers, application, and documents preparation to apply for EMI or payment license, communication with central banks and financial authorities.