MAS Payment Services Act: Why DBS Vickers is allowed to trade crypto while Binance.com is banned

A couple of weeks ago, Binance International (Binance.com) made the headlines in Singapore because it was ordered by the Monetary Authority of Singapore (MAS) to cease providing payment services in Singapore.

A week after, DBS Vickers and The Independent Reserve, both crypto exchanges in their own right, were granted licenses by MAS. 

What gives? Why did DBS get the green light while Binance.com got banned?

The key to this is MAS’ Payment Services Act, which combats money laundering and financial terrorism, while safeguarding consumers against technological risks.

DBS Vickers and The Independent Reserve meet MAS’ requirements and can operate legally here, while Binance.com doesn’t.

What’s the difference between Binance.com vs Binance Singapore?

Just to clarify, there are two different Binancesin Singapore: Binance International (Binance.com) and Binance Singapore.

Binance International (Binance.com) has a list of exhaustive services, notwithstanding the following:

• Paying for trading fees on Binance DEX (Decentralised Exchange)
• Paying for transaction fees on the Binance Chain
• Paying for transaction fees on the Binance Smart Chain
• Paying for goods and services for both online and in-store purchases (e.g., using Binance Card or Binance Pay)
• Paying for hotel and/or flight bookings and more at Travala.com
• Using it as a community utility token on the Binance Smart Chain ecosystem (such as games and DApps)
• Participate in token sales hosted on the Binance Launchpad
• Donate on Binance Charity
• Providing liquidity on Binance Liquid Swap

In addition, Binance International has one of the largest selection of cryptocurrencies to exchange — over 100, in fact. In comparison, Gemini Singapore only has over 50 cryptocurrencies. 

Compare these large ranges of services and cryptocurrencies selection with Binance Singapore. It only has eight cryptocurrencies available to trade, and there is no exchange (or expert UI) interface. It would stand to reason that Singapore consumers would naturally gravitate to Binance International to expand their crypto ventures after dipping their toes in Binance Singapore. 

Binance International also has a lower trading fee of 0.1 per cent, whilst Binance Singapore has a trading fee of 0.6 per cent. Cheaper is better, right?

Not to MAS, at least, because Binance International does not hold a license to operate in Singapore under the Payment Services Act. As a result, Singaporeans with funds in Binance International have until Tuesday, Oct 26, 2021 to withdraw their funds and store it in an MAS-approved exchange.

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What is the Payment Services Act?

The Payment Services Act was introduced in 2019 to safeguard consumers against the risks that come with digital payment services that have been popping up lately.

This law was created after several consultation papers (such as Consultation Paper on the Proposed Payment Services Notices on Prevention of Money Laundering and Countering the Financing of Terrorism) which identified four key risks in the e-payment ecosystem:

• Money laundering and terrorism financing
• User protection (safeguarding e-funds in transit, as well as deposited e-funds)
• Interoperability (a common payment standard and infrastructure)
• Mitigating technological risks through governance, authentication, cyber hygiene, encryption and anti-fraud

Since then, MAS has made addressing these risks a priority; see articles below:

• MAS to introduce new digital platform to fight money laundering (CNA, Oct 1, 2021)
• $69 million in suspicious transactions in S’pore intercepted by authorities since 2019 (The Straits Times, April 27, 2021)
• S$1 million penalty for Singapore branch of Swiss bank for breaching anti-money laundering requirements (CNA, April 14, 2021)

There’s also the MAS Investor Alert List, of which Binance International is on. It’s on the first page, no less. 

Granted, MAS’ list is arranged in alphabetical and chronological order, but do not let that detract you from the intense global scrutiny that Binance International is facing:

• S’pore joins growing crackdown on Binance: What you need to know about the crypto exchange platform (The Straits Times, Sept 3, 2021)

• Crypto traders want payback after losing millions to Binance glitches (NBC News, Aug 19, 2021)

• Malaysia takes aim at Binance CEO as global crackdown escalates (Nikkei Asia, July 30, 2021)

• Binance crackdown widens in Europe and Hong Kong (Financial Times, July 16, 2021)

Remember that this crackdown is only on Binance International. Binance Singapore is part of Binance Asia Services (BAS), that is currently exempted from holding a licence that allows digital payment token services, as part of transitioning towards an official licensing scheme that DBS Vickers and Independent Reserve has passed.

Which crypto exchanges must comply with the Payment Services Act?

The Payment Services Act applies to big players classified as a Major Payment Institution by MAS:

• More than $3 million in monthly transactions for any activity type
• More than $6 million in monthly transactions for two or more activity types
• More than $5 million in daily outstanding e-money

According to Coinmarketcap, Binance International’s trading volume is estimated at $45 billion per DAY. Binance.com is definitely classified as Major Payment Institution.

For such a gargantuan financial entity, it would make sense that MAS would want to defend Singapore consumers against Binance International, lest it consumes them all.

Meanwhile, there are plenty of smaller crypto exchanges that have not been officially sanctioned by MAS. Note that they may not have a formalised license and might be operating on exemptions whilst MAS transitions to a formalised licensing scheme under the Payment Services Act. 

What must one do to comply with the Payment Services Act?

To comply with the Payment Services Act, Major Payment Institutions like Binance International must safeguard customer money through one of these means:

• Undertaking by a bank or prescribed financial institution to be fully liable to the customer
• Guarantee by a bank or prescribed financial institution
• Segregation in a trust account maintained by an approved Singapore bank or prescribed financial institution

In addition, anti-money laundering and/or -financial terrorism measures are imposed on these five payment services:

1. Account issuance
2. Domestic money transfers
3. Cross-border money transfers
4. Digital payment, token dealing or exchange
5. Money changing

Does that list sound familiar? If it does, it’s because all of that applies to the services that Binance International offers.

Whilst we do not know the exact details that led to Binance International’s ban in Singapore, it would stand to reason that it does not meet one of, or any of the requirements that MAS’ Payment Services Act has outlined.

Unlike Binance International, DBS Vickers and Independent Reserve have obtained licenses to operate their crypto exchanges in Singapore. 

From this, we can infer that they are compliant with the Payment Services Act.

DBS Vickers, at least, has met this requirement:

• Segregation in a trust account maintained by an approved Singapore bank or prescribed financial institution

Takeaways for cryptocurrency investors

For crypto investors, it’s a good thing that MAS is setting clear guidelines on what is required to operate within its green gardens. 

Binance International does not meet MAS’ requirements to fight money laundering and financial terrorism, so it got the boot.

Meanwhile, DBS Vickers and Independent Reserve got the green light to operate within Singapore.

They join a growing list of crypto exchanges that can operate within Singapore, but do note that the ones that already do, do not have a formalised license like DBS Vickers and Independent Reserve do. They are operating on exemptions whilst MAS transitions to a formalised framework that DBS Vickers and Independent Reserve are operating under. It is anticipated that they will have licenses revoked or formalised depending on how MAS screens them.

We’re in this fluxed period where MAS is setting the foundation for crypto exchanges to operate legally in Singapore. Before you panic and move your funds over to DBS Vickers or Independent Reserve, it would be good to find out:

1. If your current exchange of choice has plans to comply with MAS’ regulations
2. What the trading fees are on DBS Vickers and Independent Reserve
3. What the withdrawal funds are from your current exchange, should you decide to move your funds

This is a scary, but also incredibly exciting time to be in the cryptocurrency landscape in Singapore. Just be sure to act with good research and information when it’s time to move your funds!

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This article was first published in MoneySmart.