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Author: Crypto Brave

To begin with the conclusion:

1. The Monetary Authority of Singapore (MAS) is implementing virtual asset regulations in preparation for the Financial Action Task Force (FATF) mutual evaluation set to begin in June 2025. The FATF has had guidelines related to virtual assets since 2021, and Singapore has not provided a grace period; the timeline is precisely set.
2. Singapore has been warned by the FATF for two consecutive years regarding issues in anti-money laundering (AML) and counter-terrorism financing (CFT). If there are further issues in this year's evaluation, it may face downgrading, affecting the inflow and outflow of significant capital and the image of an international financial center.
3. Since last year, the Singapore government has been intensively issuing policies and self-assessment reports, repeatedly emphasizing the challenges and effectiveness in combating money laundering, with virtual assets and digital payment channels identified as the primary new threats.
4. The FATF evaluation process must be conducted separately with virtual asset service providers (VASPs) (government personnel cannot be present). This is why Singapore is "driving away" unlicensed VASPs before June 30, ensuring that only compliant entities participate and reducing the risk of being accused of regulatory loopholes.
5. Like Singapore, Hong Kong also adheres to the FATF's anti-money laundering guidelines. Singapore is regulated by the MAS, while Hong Kong is primarily regulated by the SFC. It is difficult to expect Hong Kong to be more innovative in Web3 policies and catch up with Singapore's wave.

To elaborate:

The FATF is an intergovernmental organization responsible for setting and evaluating international standards for anti-money laundering (AML), counter-terrorism financing (CFT), and counter-proliferation financing (CPF). By reviewing the compliance and effectiveness of measures in member countries, it maintains the "grey list" and "black list," applying pressure on non-compliant countries and addressing emerging threats such as virtual assets.

If downgraded by the FATF, Singapore may face risks such as restrictions on cross-border transactions, capital outflows and reduced investment, financial market volatility, damage to international reputation, and increased regulatory and compliance costs.

Singapore's last FATF mutual evaluation was in 2016, where the first national risk assessment report rated foreign-sourced terrorist financing activities as medium risk. The report identified high ML/TF risks in the non-financial sector, particularly in telecommunications service providers, the casino industry, and pawnshops.

In 2024, Singapore's national risk assessment report assessed the money laundering risks related to virtual assets as medium to high and provided a detailed analysis of the risks associated with virtual assets in cybercrime, investment fraud, illegal trading, and terrorist financing, such as the cross-border nature of remittances between cryptocurrency exchanges and the anonymity of mixing activities in DeFi.

The report also mentioned that over the past five years, Singapore has uncovered $6 billion in laundered money. These assets include bank account deposits, real estate, and cryptocurrencies. In some negative media reports, Singapore has inadvertently become a global "money laundering center."

According to sources in Singapore's crypto compliance sector, Singapore has indeed been warned by the FATF for two consecutive years regarding issues in anti-money laundering and counter-terrorism financing. If there are further issues in this year's evaluation, it may face downgrading, affecting the inflow and outflow of significant capital and the image of an international financial center.

Therefore, during the same period, the Singapore government has also begun to intensively issue relevant policies, compliance guidance for major industry associations, and media promotions in preparation for the FATF mutual evaluation in June 2025.

Last year, Singapore's Prime Minister Lawrence Wong emphasized during the FATF plenary meeting that virtual assets and digital payment channels are the primary new threats.

This year's FATF mutual evaluation in Singapore is expected to require compliance with the “Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (VASPs) Updated Guidance” released by the FATF in 2021, covering six key areas: definitions of VASPs, stablecoins, P2P transactions, licensing and registration, travel rules, and regulatory cooperation, providing detailed guidance for AML/CFT implementation.

The new regulations for digital token service providers (DTSP) implemented by the MAS starting June 30 also primarily aim to comply with the effectiveness of the FATF guidelines. In other words, Singapore has provided the virtual asset industry with sufficient grace periods over the past few years, and this year is indeed the last moment before tightening regulations.

The Singapore government is known for its efficiency, and this FATF evaluation has been prepared for a long time. It is technically unlikely to be caught off guard by the FATF, and the possibility of being downgraded or losing membership is low.

For example, the FATF mutual evaluation requires separate discussions with the private sector (including VASPs), with government personnel not allowed to be present. To this end, Singapore has required unlicensed VASPs to cease operations before June 30, 2025, aiming to ensure that only compliant VASPs participate in the evaluation and reduce the risk of being accused of regulatory loopholes. The list and classification of licensed and exempt enterprises can be referenced in media compilations.

Additionally, both Hong Kong and Singapore adhere to the FATF's anti-money laundering guidelines. Singapore is regulated by the MAS, while Hong Kong is primarily regulated by the SFC. It is difficult to expect Hong Kong to be more innovative in Web3 policies and catch up with Singapore's wave. The breakthroughs in Hong Kong's Web3 still depend on the policies and measures from the mainland.

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