Singapore plans new guidance for banks on control of crypto customers

by Arthur · April 5, 2023

(Bloomberg) — Authorities in Singapore are working with lenders in the city-state to set uniform standards for screening potential customers from the crypto and digital asset sectors, amid various global fallout in the industry.

The central bank and police have helped banks fine-tune their assessment method when opening accounts for service providers in all types of digital assets, according to people with knowledge of the matter. The project has been underway for about six months, and an industry report outlining best practices in areas such as due diligence and risk management could be published in the next two months, the people said, asking not to be identified as the discussions are not public.

Stablecoin, non-fungible tokens as well as transferable gaming or streaming credits will also be covered under this initiative which focuses on firms that provide services in payments, trading and transfers of these assets, one of the people said. Even with such guidelines, banks will decide whether to accept these customers based on their risk appetite, the people said.

The crypto industry has long fought for easy access to traditional banks, many of which remain wary of the volatility of digital assets and potential regulatory heat, especially in the wake of high-profile failures at firms from FTX to Terraform Labs. The collapses of US lenders Silvergate Capital Corp. and Signature Bank, which provided payment services for crypto firms, have also prompted customers to search for new banks.

There are no rules preventing banks operating in the country from doing business with firms that handle cryptocurrencies or other forms of digital assets, the Monetary Authority of Singapore said in response to questions from Bloomberg.

“As with any other current or potential customer, banks are required to conduct customer due diligence measures to understand and manage the risk(s) that they pose,” MAS said without commenting on the project. “Banks decide for themselves whether to start or continue a banking relationship with a customer, balancing commercial considerations with business risk tolerance.”

Still, some firms in the country had previously had trouble opening bank accounts, as domestic lenders were concerned about potential illicit flows and other criminal activities.

Singapore has seen its fair share of crypto scandals from firms that were based in the country, such as Terraform Labs and crypto hedge fund Three Arrows Capital. It is among major jurisdictions that have established a licensing regime for the industry, and has proposed several curbs on crypto trading by retail investors.

–With the assistance of Suvashree Ghosh.