Licenses in Singapore and crypto-related activities
MAS/MPI license allows providing DPT (digital payment token) services. Until the end of 2022, MAS granted licenses to eleven payment institutions (9 MPIs and 2 SPIs) operating with cryptocurrencies, including Revolut, FOMOPay, Paxos, etc. Additionally, seven crypto companies have received in-principle approval from MAS and are awaiting a final decision.
The money-Changing license allows exchanging fiat currencies for cryptocurrencies and vice versa.
Here is a step-by-step guide to obtaining SPI (Standard Payment Institution) license in Singapore:
VASP (Virtual asset service provider license) is a new opportunity for fintech businesses starting in 2023.
Hong Kong has recently approved a new proposal to establish a new licensing regime for virtual asset service providers (VASPs). Under the new licensing regime, any business seeking to provide virtual asset services must obtain a VASP license from the Securities and Futures Commission (SFC).
The changes have been introduced through amendments to the current Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO), and it comes into operation starting from the 1st of March, 2023.
Scope of license
The only activity currently defined as “providing a VA service” is operating a virtual assets exchange. Operating a virtual assets exchange is defined as providing services through means of electronic facilities:
a. whereby:
i. Offers to sell or purchase virtual assets are regularly made or accepted in a way that forms or results in a binding transaction; or
ii. persons are regularly introduced or identified to others so that they can negotiate or conclude (or have a reasonable expectation of negotiating or concluding) sales or purchases of virtual assets; and
b. where client money or client virtual assets come into the direct or indirect possession of the person providing the service.
Licensed VASPs will only be allowed to provide services to professional investors, at least during the initial stage of the licensing regime.
If a company plans to operate with security tokens, obtaining VATP (Virtual Asset Trading Platform) license from the SEC is necessary instead of a VASP license. Sino Fintech professional team is ready to assist you in obtaining the VATP license as well if your business activities include trading security tokens.
VASP license and crypto-related activities
Not all digital assets are considered to be “virtual assets.” In more technical terms, a VA includes three essential elements:
- a cryptographically secured digital representation of value that is expressed as a unit of account or a store of economic value;
- it can be transferred, stored, or traded electronically; and
- it can be used to pay for goods or services, to discharge a debt and investment, or to provide rights, eligibility, or access to vote on matters related to any cryptographically secured digital representation of value.
Common examples of virtual assets include cryptocurrencies and other asset classes in the virtual world that satisfy these three elements.
The definition does not cover digital representations of fiat currencies, central bank digital currencies, financial assets already regulated under the SFO such as securities and futures contracts, stored value facilities which are separately regulated under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584) or “limited purpose digital tokens” which include non-transferable, non-exchangeable and non-fungible closed-loop, limited purpose items, such as air miles, credit card rewards, gift cards, customer loyalty programmes, and gaming coins.
Security tokens trading activities are covered by VATP (Virtual Asset Trading Platform) license from the SEC instead of a VASP license.
Non-fungible tokens (NFTs) are generally unique cryptographic tokens that exist on a blockchain and cannot be replicated. Whether an exact NFT is a virtual acceptance for Hong Kong's legal regime or not will depend on its nature and functions in the ecosystem where it is used.
Some NFTs are designed to be collectibles and are not intended to be convertible into money or another medium of exchange accepted by the public. These NFTs may fall within the meaning of “limited purpose digital token” and would be excluded from the ambit of the new licensing regime. However, some NFTs contain ‘fungible’ elements or allow holders to vote on their arrangement. In these circumstances, the arrangement of the NFT may constitute a VA. Whether the characteristics of a specific NFT go beyond the boundary of a collectible will be determined on a case-by-case basis.
If an applicant is a Hong Kong incorporated company, it should have a permanent place of business in Hong Kong. If an applicant is an overseas company, it should be registered under the Hong Kong Companies Ordinance (Cap. 622).
“Ultimate owner” is defined to include any individual who owns or controls (directly or indirectly) more than 25% of the issued share capital of the VASP, controls more than 25% of the voting rights at its general meetings, or controls its management.
Criteria for the “fit and proper” test include:
- financial status or solvency of the person;
- educational or other qualifications or experience regarding the nature of the functions;
- the ability to carry on the regulated activity competent, honest, and fair way;
- reputation, character, reliability, and financial integrity;
- non-conviction for AML/CFT offence involving fraudulent, corrupt, or dishonest conduct.
Authorization for digital banking
ArticleThe HKMA can authorize fintech companies in Hong Kong. Legal and technical standards for the HKMA authorization are higher than the MSO license. Suppose your business's planned activities are connected with e-payments, digital banking, and card issuance. In that case, an MSO license can be a starting point, and our team can advise you to choose an appropriate authorization.
HKMA is the resolution authority for all banking sector entities.
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HKMA applies the Guideline on Minimum Criteria for Authorization. What are those standards?
1. There is a standard for minimum capital, as the HKMA should see that the company presently has, and will, if it is authorized continue to have, adequate financial resources (whether actual or contingent) for the nature and scale of its operations. The minimum standard is:
-In the case of a company seeking authorization to carry on banking business in Hong Kong, the aggregate amount of its paid-up share capital and the balance of its share premium account (if any) is not less than $300,000,000 or equivalent in any other approved currency;
- In the case of a company seeking authorization to carry on a deposit-taking business as a deposit-taking company, the aggregate amount of its paid-up share capital and the balance of its share premium account (if any) is not less than $25,000,000 or an equivalent amount in any other approved currency;
- In the case of a company seeking authorization to carry on a deposit-taking business as a restricted license bank, the aggregate amount of its paid-up share capital and the balance of its share premium account (if any) is not less than $100,000,000 or an equivalent amount in any other approved currency.
2. There is a standard for adequate systems of control. Each person who is, or is to be, a company manager shall be a fit and proper person to hold the particular position he holds or is to hold. The HKMA examines the profiles of the management team members and compliance officers.
3. There is a standard for financial due diligence. If the company is incorporated in Hong Kong, the HKMA requires disclosing adequate information regarding the following:
- the company’s profit and loss and its financial resources (including capital resources and liquidity resources);
- audited annual account statements and any supplementary information to those audited annual accounts;
- the report of the directors under section 388 of the Companies Ordinance;
- the institution’s cash flow statement with notes if this cash flow statement does not already form part of the disclosed audited annual accounts.
4. The HKMA The Monetary Authority is satisfied that the business (including any business which is not banking industry or the business of taking deposits) of the company is presently, and will, if it is authorized continue to be, carried on with integrity, prudence and the appropriate degree of professional competence; and in a manner which is not detrimental, or likely to be detrimental, to the interests of depositors or potential depositors. To prove that your business meets this requirement, a business model, a business plan with financial projections, and relevant information about the core team shall be provided.
Moreover, suppose the company seeking authorization to carry on banking business in Hong Kong is a company incorporated in a place outside Hong Kong. In that case, there should be an acceptable degree of reciprocity regarding banks incorporated in Hong Kong seeking to conduct banking business there.
HKMA authorization for a virtual bank
Since virtual banks will engage primarily in retail businesses covering a large segment of retail customers, they are expected to operate as a locally-incorporated bank. This aligns with the established policy of requiring banks that operate significant retail businesses to be locally-incorporated entities.
A person who holds over 50% of the share capital of a bank incorporated in Hong Kong should be a bank or a financial institution in good standing and supervised by a recognised authority in Hong Kong or elsewhere. If a locally-incorporated virtual bank applicant is not owned by such a bank or financial institution, the HKMA expects the applicant to be held through an intermediate holding company incorporated in Hong Kong, with supervisory conditions imposed on this intermediate holding company. The supervisory conditions to be imposed will normally cover requirements on capital adequacy, liquidity, large exposures, intra-group exposures and charges over assets, group structure, activities undertaken, risk management, fitness and propriety of directors and senior management, and the submission of financial and other information to the HKMA.
Accordingly, both financial firms (including existing banks in Hong Kong) and non-financial firms (including technology companies) may apply to own and operate a virtual bank in Hong Kong.
In addition to the requirements for the incorporation form and ownership, there are the following requirements for the applicants for a virtual bank authorization: