Singapore: 2022 Fintech Laws And Regulations In Singapore

Singapore as Fintech Hub

Singapore is a conducive hub for fintech businesses to incubate, scale, and set up base to expand into South-East Asia markets.

This is because of the robust and clear laws for corporate financing and investments (including corporate law, investor protection, dispute resolution), progressive fintech laws & regulations and regulatory sandboxes for innovation.

The Singapore Government is highly supportive of innovative startups and businesses, through government grants and taking the lead in facilitating fintech innovations in Singapore and through cross-border collaborations. Business and tech talent is also readily available; also, foreign tech talent is attracted to coming to Singapore.

Further, the strong Singapore brand in terms of government and regulations makes it an attractive proposition to have a regulated fintech business licensed here.

Venture capital (VC) funding and investment in Singapore remain active and strong. Government-linked funds, e.g., Temasek-linked funds, and international VC firms, such as Sequoia Capital, have injected and continue to inject capital.

Legal & Regulatory Framework for Fintech

Apart from legislation governing traditional financial institutions such as banks and funds, fintech businesses may be regulated under the following laws along with the corresponding activities or characteristics.

It should be noted that the regulatory obligations under the SFA and FAA have extraterritorial effects e.g. sections 196, 205, 213, 339 of the SFA and section 90 of the FAA. Thus, if a person does something outside of Singapore which is deemed to be done partly in Singapore and which is prohibited under the regulations without a licence, it would be a breach. Similarly, if an activity done wholly outside Singapore could have a substantial and foreseeable effect in Singapore, it would also be caught. There are also restrictions on solicitation and advertising in Singapore by or for overseas persons.

Apart from the above, the Personal Data Protection Act 2012 (PDPA) also generally applies with regard to the collection, use and disclosure of personal data. The Monetary Authority of Singapore is also presently looking into regulating stablecoins.

General regulatory risks which are sought to be addressed through the regulatory frameworks include money laundering/terrorism financing (ML/TF) risks, user/consumer protection, interoperability, and technology risks.

For certain fintech business activities, exemptions from licensing could apply depending on whether the requirements are satisfied. In some instances, certain business models may be structured such that it does not fall within the scope of regulation at all.

For businesses that do have to be licensed, corporate structure, expertise, and experience of key personnel, having a dedicated internal compliance function, and robust business policies addressing ML/TF, technology, operational, data protection and user protection risks are important to increase the prospects of obtaining the requisite licence.

Generally, however, even if no specific licence is required for any fintech business activity, anti-ML/TF rules based on Financial Action Task Force (FATF) standards and guidelines would apply. This includes MAS Notices on AML/CFT. Know Your Customer (KYC) and customer due diligence requirements should be stringently satisfied.

MAS offers a Fintech Regulatory Sandbox for first mover or early adopter fintech businesses with novel applications to pilot their business models and applications. For fintech businesses with low-risk activities, they can pilot in the market even more quickly with Sandbox Express. Sandbox Plus also offers grant funding under a Financial Sector Technology and Innovation – Financial Institution (FSTI-FI) Projects track. Eligible applicants may also get onto a platform for deal-making, mentoring, networking and funding opportunities under a collaboration between MAS and Enterprise Singapore, a government agency which champions enterprise development.

We have advised clients on the Fintech Regulatory Sandbox. As an example, one of our clients entered the Sandbox to operate an exchange for security digital tokens. This was at the time a novel fintech business and they were a first mover in this regard, being one of the first few fintech businesses in Singapore to operate such an exchange. We assisted the client with the Sandbox application and to address various legal, regulatory and compliance issues for the client to then graduate from the Sandbox by applying for a full licence to operate the exchange as a Recognised Market Operator (RMO). The client eventually succeeded in obtaining the coveted RMO status from MAS and presently operates two platforms: an exchange for trading cryptocurrency or digital payment tokens; and an exchange for digital tokens which constitute securities and/or collective investment schemes ("CIS").

We have also advised and are in the midst of advising various clients on developing or operating other fintech businesses such as BNPL platform business, digital securities brokerage platform business, utility token, DPT and NFT issuances, security token structuring and issuances, merchant acquisition and money transfer services, among others.

As such, we have the expertise and experience to partner with and advise businesses that wish to start, expand, develop, or scale their fintech businesses in Singapore.