Singapore continues to maintain its position as a forward-looking and well-regulated financial hub—particularly in the space of digital assets and financial crime risk. In March and April 2025, the Monetary Authority of Singapore (MAS) released two significant consultation papers proposing enhancements to:
- The prudential treatment of cryptoasset exposures by banks; and
- The Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework across financial institutions (FIs).
These proposals—currently in the consultation stage—do not yet carry legislative force. However, they indicate MAS’s intent to align with evolving international standards, including those set by the Basel Committee on Banking Supervision (BCBS), and reinforce Singapore’s commitment to safeguarding financial stability and integrity.
This article outlines the key proposals in both consultation papers, their implications for financial institutions, and how legal and compliance professionals can prepare for the anticipated changes.
1. Consultation on Prudential Treatment of Cryptoassets (P003-2025)
MAS’s first consultation paper sets out a framework for how Singapore-incorporated banks should treat cryptoasset exposures for prudential purposes, in line with the BCBS’s December 2022 standards. These proposals are expected to take effect from 1 January 2026, subject to feedback received.
Key Proposals
Classification Framework for Cryptoassets
MAS proposes a two-group structure for cryptoasset classification:
- Group 1: Cryptoassets that meet strict classification conditions (e.g., tokenised traditional assets and well-collateralised stablecoins).
- Group 2: Higher-risk cryptoassets that fail to meet these conditions, attracting more conservative capital treatment.
Reserve Asset Requirements for Group 1b Stablecoins
MAS proposes that stablecoins in Group 1b be backed by high-quality, liquid reserve assets. Key parameters include:
- A 3-month weighted average maturity cap for the reserve asset portfolio.
- Ongoing consultations on whether repos and securities lending/swaps may qualify—provided there are adequate safeguards.
Due Diligence and Monitoring Expectations
Banks would be required to:
- Conduct rigorous pre-acquisition assessments, including risk metrics and stress-testing.
- Monitor overcollateralisation levels and peg stability on an ongoing basis.
MAS seeks feedback on what risk thresholds and indicators should be used to determine eligibility.
Capital Recognition Limitations for Retail AT1/Tier 2 Instruments
MAS proposes to exclude Additional Tier 1 (AT1) and Tier 2 capital instruments offered to retail investors in Singapore from regulatory capital recognition. Existing issuances before 1 January 2026 will be grandfathered.
2. Proposed Revisions to AML/CFT Notices and Guidelines (P004-2025)
The second consultation paper outlines MAS’s proposals to update and harmonise AML/CFT obligations for FIs across all sectors. Subject to consultation, these changes are targeted to take effect from 30 June 2025.
Key Enhancements
Incorporation of Proliferation Financing (PF) Risks
MAS will clarify that Proliferation Financing (PF) risks fall under the scope of money laundering (ML). Accordingly:
- FIs must assess ML/TF/PF risks as part of their enterprise-wide risk assessment.
- Risk mitigation measures should be proportionate and tailored.
Expanded Trustee Obligations under TCA-N03
Trust companies would face expanded due diligence obligations, including:
- A broader definition of “trust relevant parties” to cover protectors, objects of powers, and controlling individuals.
- More detailed documentation and understanding of the trust structure.
Updated STR Filing Requirements
Suspicious Transaction Reports (STRs) would now need to be filed:
- Within 5 business days of forming a suspicion.
- Within 1 business day if the case involves any sanctioned individuals or entities.
FIs would no longer be required to submit copies of STRs to MAS unless explicitly requested.
Clarifications on SoW/SoF and Screening Expectations
MAS proposes additional guidance on:
- The corroboration and plausibility of Source of Wealth (SoW) and Source of Funds (SoF).
- Expectations for multilingual screening and the detection of forged documents.
- Enhanced vigilance towards shell companies and other high-risk structures.
What This Means for Financial Institutions
Although these papers are still under consultation, they signal a clear regulatory direction. Financial institutions and digital asset players in Singapore should:
- Review the consultation proposals carefully to understand their potential impact.
- Consider submitting feedback to MAS to help shape practical and proportionate regulation.
- Begin evaluating internal frameworks—especially around cryptoasset risk classification, trust structures, and AML/CFT processes.
Early preparation will enable a smoother transition once final regulations are enacted.
How Advomi’s Panel of Lawyers Can Support
Navigating regulatory reform—especially in fast-moving sectors like crypto and compliance—requires clear legal insight and proactive planning. Our team can assist by:
- Advising on regulatory impact assessments based on your business model.
- Preparing responses to MAS consultations, tailored to your operational realities.
- Auditing internal compliance frameworks to prepare for likely changes in 2025–2026.
- Conducting training sessions on enhanced AML/CFT obligations and cryptoasset treatment.
Stay Ahead of the Curve
With MAS’s continued emphasis on regulatory robustness and financial crime prevention, businesses must stay engaged in these early consultation phases. Contact Advomi’s legal team today to explore how we can support your organisation through these evolving standards.
