Financial Services and Markets Bill – Speech by Louis Chua

Mr Speaker, I would like to declare my interest as an employee of a financial institution in Singapore and I hold a diversified portfolio which include cryptocurrencies.

The rising prominence and relevance of virtual assets

One of the key aspects of the Financial Services and Markets Bill relates to enhanced regulation of virtual asset service providers for money laundering and terrorist financing risks. In my speech today, I would like to touch on the topic of virtual assets and how this rapidly evolving area of finance is increasingly gaining prominence and relevance globally, and therefore how Singapore can continue to evolve our approach to stay ahead as a key financial centre of the world.

Two years ago in late 2020, I spoke about the Payment Services (Amendment) Bill, where I noted then that Bitcoin was at a record high of around US$34,000, having risen almost fourfold over the course of 2020, far surpassing the previous high of around US$19,800 set in December 2017 just before its precipitous crash in the months after. Many have called Bitcoin and cryptocurrencies a massive bubble then, and some still do now. Fast forward to today, Bitcoin is now at around US$46,000, but not without reaching an all-time high of almost US$69,000 and a low of US$29,000 in the last 52 weeks.

Just as how cryptocurrencies are not solely about Bitcoin and its rise and fall, virtual assets are not just about cryptocurrencies and blockchain technology does not just apply to virtual assets. The term virtual conveys a sense that it is somehow not as real as say, physical assets. But today, one’s digital identity and persona is perhaps even more significant than that of the physical world; just ask any influencer who spends most of his or her time in the digital world be it Facebook, Instagram or TikTok.

Virtual assets are not solely about individuals buying an NFT to display on their personal social media profiles, however. The chairman of BlackRock, the world’s largest asset manager, noted in his recent letter to shareholders that “BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients”. This was also the same person who called Bitcoin an “index of money laundering”! At the same time, the Ukraine-Russia conflict also saw the Ukraine Government conducting fund raising via cryptocurrencies and NFTs, with Russia also supposedly considering accepting Bitcoin as payment for its oil and gas exports. The bottom line is that, in the modern world, purely virtual creations can indeed have value, so long as enough people accept that to be the case.

If 2020 was seen by industry players as the year cryptocurrencies were institutionalised, then 2022 is perhaps the year when there is growing recognition of the trajectory of growth in the interconnectedness, and scale of digital assets and certainly its corresponding implications for global financial stability.

Singapore should demonstrate global leadership

So, the first point I would like to raise is that Singapore, and by extension, the MAS as the financial regulator, should strive to take a market leadership role and move expeditiously to facilitate the responsible development of the still nascent, but rapidly growing virtual assets industry.

By and large I do agree that the MAS has been proactive in studying the development of this industry early on. Project Ubin, for example, was announced all the way back in November 2016 to explore the use of Blockchain and Distributed Ledger Technology. The final phase of the project concluded in July 2020, but as pointed out by my colleague Jamus during the COS debates earlier this year, after expending significant effort and resources to better understand the nature, function and practical operations surrounding the possibility of a digital currency issued by our central bank, the conclusion is that there is no pressing need for its issuance at this time.

This despite several advantages to moving earlier on issuance, such as crowding-out alternatives such as unbacked and inherently volatile digital private currencies through a stable, well-designed Central Bank Digital Currencies (CBDC); allow for the application of more innovative monetary policy, especially with regard to disinflation; and help reduce the incidence of counterfeiting and illicit activities.

As noted in The White House fact sheet on US President Biden’s executive order on ensuring responsible development of digital assets, over 100 countries today are exploring or piloting CBDCs, and in China, after launching the digital yuan domestically, such digital yuan payment services were also introduced to visitors of the Beijing Winter Olympics.

Given the early stages of most central banks’ work into CBDCs, this would be one area in which Singapore can demonstrate global leadership in.

The need to move expeditiously to eliminate bad actors, encourage responsible providers

A related point is one which I have raised back in 2020, about the progress made in assessing Payment Service Provider applications and the slow pace at which approvals were given. Subsequently in response to my PQ in July 2021, it was noted that since the commencement of the Payment Services Act, MAS has received over 480 licence applications. However, MAS had not issued any licence to DPT service providers. I note several in-principle approvals since then, such as that for DBS, Independent Reserve, Fomo Pay, CoinHako, Triple A, Paxos, DTC and Hodlnaut.

At last count, I still see 163 companies that are currently under the exemption list. What then, is holding the MAS back on approvals or rejections, given the wealth of experience gained over the last two years?

The world’s largest crypto exchange, Binance, announced in December last year that it has withdrawn its licence application to operate here in Singapore, and has since shut down its operations here in February. Shortly after in March last month, the company was awarded a Virtual Asset Licence from Dubai’s recently formed Virtual Asset Regulatory Authority and will be helping to set up an international virtual asset ecosystem in Dubai and assist with the development of virtual asset regulations.

While it is debatable whether it is a loss for Singapore per se, to be clear, I am not calling for licenses to be hastily awarded. But we also need to recognise that there are firms still allowed to operate under a transitional exemption, regardless of their merits, until the applications are approved or rejected. Hence getting the applications approved or rejected expeditiously not only gets rid of potential bad actors but allow responsible market players to move forward with their business plans, entrench their operations here in Singapore for the long term and contribute to the vibrancy and innovation in the sector.

In the MAS 2020 licensing & registration report for capital markets intermediaries, I note that the MAS is committed to a 4-month timeframe for processing corporate licence and registration applications, with the mean and median time taken not too far off from the 4-month service standard. Similarly, I hope more resources can be devoted to ensuring that we help to support and facilitate the responsible development of the virtual asset industry in Singapore.

Holistic review on advertising by financial market participants required

Next, I would like to touch on the ban on marketing and advertising by service providers of digital payment tokens (DPT), as announced by the MAS in January this year. I wonder whether an outright ban unique to DPTs is an appropriate means of protecting consumers, and consistent with the approach in which the MAS regulates advertising of other investment products and services.

I acknowledge and agree with the MAS view that the trading of cryptocurrencies is highly risky and not suitable for the general public per se. However, single stock investing however, is also highly risky in my view. Grab and SEA, for example, among Singapore’s largest companies by market cap, saw their share prices down 40-50% in the year-to-date alone, with SEA down 60-70% from its 52-week high.

What I am most concerned with however, are complex derivative products available to retail investors that even I myself struggle to understand, such as Contracts for Difference or CFDs, which in itself is an instrument which is banned for sale to retail investors in the United States and Hong Kong. I recall hearing ads for CFDs on the radio just a few months ago, and even reading branded content on the ST about how these products can supposedly allow investors to manage trading risks. Ironic in my view, given that it can be a product with ten times leverage, with risks of a complete wipe-out of the investment within a short period of time, and which is significantly riskier than an equivalent unleveraged financial instrument.

I do not think that having a standard boiler plate, “this advertisement has not been reviewed by the Monetary Authority of Singapore” and long paragraphs of text in fine print is sufficient a measure for financial institutions to absolve of their responsibilities towards retail investors. But perhaps advertising by DPT service providers could also come within the scope of the fair and balanced advertising and other advertising restrictions, as covered under the securities and futures regulations and financial advisers’ regulations, with the rules holistically reviewed and fine-tuned collectively to ensure that all financial market participants do not merely present a one-sided view of potential investment products in their advertisements.

Importantly, more should be done in terms of continuing financial education and improving the financial literacy of the population at large, to help everyone understand the underlying risk and rewards of their investments, be it in Ethereum or equities.

Managing the risk of Money Laundering and Terrorism Financing

Finally, no discussion on cryptocurrencies is complete without an appreciation of the money laundering and terrorist financing risks it presents.

To this end, I note that the bill will align the scope of digital token services to the enhanced Financial Action Task Force (FATF) standards. The MAS has already implemented the so called “travel rule” since early 2020, and even though many DPT service providers may still be operating under an exemption, many have already progressively requested for originator and beneficiary information to be provided.

However, I note that under the MAS Notice PSN02 Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service, value transfers exceeding S$1,500 would require personally identifiable information such as residential addresses, identity card numbers etc. Would the MAS end up being inundated with transactional data given the low threshold, and how would the MAS manage the risks of having questionable transactions slip through the cracks vs. being overwhelmed with data which could end up expending resources to investigate too many suspicious transactions which were flagged out, which could otherwise turn out to be legitimate?

To further clarify, would major payment institutions licensed and regulated under the Payment Services Act be required to be separately licensed once again, now that the FSM Bill will regulate all virtual asset service providers created in Singapore that provide such services outside of Singapore?


At the Singapore FinTech Festival in November last year, MAS Managing Director Ravi Menon spoke about crypto-based activities, noting that “not to get into this game, I think risks Singapore being left behind. Getting early into that game means we can have a head start, and better understand its potential benefits as well as its risks.”

I would argue that we had a head start, but many other financial centres across the world are fast catching up or arguably have already caught up. It is thus important that we remain open minded and forward looking in addressing the opportunities and risks in this rapidly evolving area of finance, facilitate the responsible development of the industry here in Singapore while proactively addressing any threats to financial stability.

With that, I support the bill.