Singapore is one of the hottest countries in the region for fintech. Lynette Koh is a director at Helmsman, a multi-disciplinary law firm that has been expanding its offering beyond shipping and commodities to areas like corporate, banking and finance, dispute resolution and employment. She talks about some of the regulations companies in the fintech space need to keep in mind, and how this area is expected to develop in the near future.
ALB: What are some of the key regulations in Singapore’s fintech space today that companies need to keep in mind?
LYNETTE KOH: In Singapore, one key instrument regulating payment and transactions with cryptocurrency and fintech, in general, is the Payment Services Act 2019. The PSA regulates and requires a license for services such as e-money issuance service, domestic or cross-border money transfer service, and digital payment token service. Cryptocurrencies, for example, are generally treated as “digital payment tokens” under the PSA, and hence regulated if any service provider wishes to provide services of dealing in digital payment tokens or facilitating the exchange of digital payment tokens.
Outside of hard law, regulators have been guiding the public and industry through informal consultations and practice statements. For example, in Singapore, Finance Minister Lawrence Wong clarified in March 2022 the tax treatment of NFT trading.
Courts have also played an instrumental role in providing gap fillers for the regulation of the likes of NFTs and cryptocurrency. For example, the Singapore courts have over the last few years held that cryptocurrency and NFTs are properties, although the exact contours of such property rights are yet to be fully defined.
ALB: What are the products that are the most difficult for clients to navigate?
KOH: Products relating to cryptocurrencies and/or NFTs. Many people do not fully understand how they truly work, or the legal rights or liabilities which may be attached to these products.
Part of the very challenging analysis is actually ascertaining the business idea behind such products. Cryptocurrency or NFTs are ultimately just one element of a complex product, and whether a particular kind of cryptocurrency or collection of NFT is regulated depends in the end on the broader product. Some clients expect their lawyers to simply “rubber stamp” a compliance opinion, but we try to spend more time asking the client to walk us through in greater detail their intended operating model. This takes effort and education, as some clients may not understand the level of inquiry that is required for such an opinion to be provided, and which accurately reflects the business reality of their operating model.
ALB: Can you talk a bit about your firm’s fintech offering and experience?
KOH: Prior to joining Helmsman, I was Head of Legal and Business Administration, Asia & Oceania Administration Department of Mizuho Bank. My experience gave me good exposure to how regulations are intended to protect and stabilise the marketplace for borrowers and lenders. However, I was always brimming with ideas on how to generate finance and capital in a way other than traditional lending and borrowing. At Helmsman, we regularly advise on alternate lending and borrowing issues and structures, and given our firm’s strong background in commodities trading, we have advised clients who need lawyers having a strong understanding of the rather niche trading industry, coupled with the flexibility to move their business into the fintech space via e-platforms that work seamlessly and effectively.
A practical understanding of the business and technical issues is critical for a lawyer to fully advise fintech clients. Helmsman has invested significantly in attaining industry knowledge. Earlier this year, we seconded our senior associate, Peter Huang, on a long-term basis, to a leading Web3 company as the sole in-house legal and compliance officer, who oversaw the entire process of company setting up, financing, and operationalisation. Peter has a strong personal interest in the cryptocurrency and Web3 space, and regularly speaks on web and crypto-related topics.
ALB: How do you expect the fintech space to develop over the next few years?
KOH: We are likely to see the continued growth of fintech, but also with further clarity on the regulatory front.
One key development to watch out for is the Payment Services (Amendment) Bill which has been passed and gazetted in early 2021, but has not come into force. The amendment bill further regulates services such as custody and transmission of digital payment tokens.
On July 19, the Monetary Authority of Singapore announced that it will hold further consultations on more regulations to protect retail investors from the risk of cryptocurrency investment, and that it will further clarify its stance on cryptocurrencies and crypto technologies in general. We have all seen how the cryptocurrency space has been affected in recent times, with several popular players in this area becoming insolvent. I would expect the regulations to be promulgated to address the risks to the average retail investor who may not fully understand them.
