Cyprus and Singapore Ramp Up Crypto Oversight to Combat Terror Financing

In a move that has a goal to bolster financial security, regulatory authorities in Cyprus and Singapore are ramping up efforts to combat terror financing, with a special focus on the use of cryptocurrencies.

Cyprus’s New Directive for Accountants

The Institute of Certified Public Accountants of Cyprus (ICPAC), a regulatory body for the accountancy profession in Cyprus, has issued a “terror financing alert,” urging accounting and audit professionals to play a proactive role in detecting and preventing terror financing activities. This initiative highlights the crucial role of financial oversight in combating such crimes.

According to the ICPAC, terrorist organizations are known to use five primary methods for transferring funds: donations via nongovernmental organizations (NGOs), cash, bank transfers, gift cards, and cryptocurrencies. The alert emphasizes vigilance in transactions involving cryptocurrencies, particularly anonymous cross-border peer-to-peer transfers, crowdfunding, charities, and anonymous online fundraising campaigns.

ICPAC has directed its members, associated firms, and compliance officers to report any suspicious transactions. Failure to do so will be considered an offense, subjecting flagged transactions to rigorous scrutiny. This includes profiling individuals, screening crypto wallets and transactions, and implementing specialized blockchain tools.

Singapore Tightens Regulations

Simultaneously, Singapore has strengthened its regulatory framework against money laundering and terror financing, particularly concerning cryptocurrency exchanges. This development underscores Singapore’s commitment to maintaining a secure and reliable financial ecosystem.

The Monetary Authority of Singapore (MAS) has updated its national risk assessment for terrorism financing, raising the risk level for cryptocurrency exchanges from medium-low to medium-high. This measure aims to prevent the misuse of Singapore’s economic openness by criminal and terrorist entities.

In line with the revised regulations, cross-border online payments continue to be classified as high-risk due to their potential for facilitating illicit activities. The MAS’s updated national assessment on money laundering highlights the substantial risks associated with digital payment token (DPT) service providers.

To address these risks, the MAS has expanded regulatory oversight to include DPT providers, imposing stringent anti-money laundering (AML) and counter-terrorism financing (CFT) measures. This expansion allows DPTs to offer custodial and transfer services for cryptocurrencies, reinforcing Singapore’s commitment to a secure financial sector.

Singapore’s Pro-Crypto Stance

Despite the regulatory tightening, Singapore remains a pro-cryptocurrency nation. The country boasts a higher-than-average adoption rate of 11.2% compared to the global rate of 4.2%. Digital currencies such as Bitcoin and Ether are recognized as digital payment tokens and have legal status in Singapore.

Singapore’s comprehensive regulatory framework for digital assets has made it a significant hub for cryptocurrency exchanges and fintech companies, fostering both innovation and regulatory compliance. This environment has attracted numerous cryptocurrency exchanges and fintech companies to establish operations in Singapore.

The Broader Impact

The efforts by Cyprus and Singapore reflect a broader trend in global financial regulation, where countries are increasingly recognizing the dual role of cryptocurrencies in fostering innovation and posing risks. By enhancing vigilance and regulatory oversight, both nations aim to create secure financial environments that prevent the misuse of digital assets for illicit activities.

As global financial systems continue to evolve, the actions of regulatory authorities in Cyprus and Singapore serve as a reminder of the importance of balanced regulation in the cryptocurrency space. These measures not only aim to curb financial crimes but also promote a safer and more transparent financial ecosystem for all stakeholders involved.

Terry Jones
Digital Assets Desk