On-chain monitoring ‘holistic risk management’ for banks, Singapore central bank says

Banks need to get serious when vetting crypto service providers, says Singapore’s monetary authority


TK Kurikawa/Shutterstock modified by Blockworks


Singapore’s central bank in a report this week outlined a number of “key risks” pertaining to cryptocurrencies — while proffering regulatory guidelines designed for crypto compliance. 

The Monetary Authority of Singapore in its report on Tuesday laid out a number of related situations for banks, reiterating previous stances around shoring up crypto risk management procedures, especially so as to guard against money laundering and terrorism financing.  

MAS officials started by defining different types of digital assets — including drawing a distinction between cryptocurrencies and stablecoins — and gauged the criteria needed for each to present a risk. 

If a crypto asset, according to the MAS, can be traded, transferred or used as a payment method or investment, guarding against potential money laundering and terrorism financing would come into play. 

“A digital asset that fulfills any 1 of the 4 criteria would be considered relevant, given it can be used to store or facilitate the movement of tainted proceeds,” the MAS wrote in the 29-page report

The MAS advised financial institutions that tokens not backed by a government or a set of regulated entities present additional risk. The same went for tokens issued under decentralized governance and tokens that can easily and quickly be exchanged for fiat currency.

Cryptocurrencies including bitcoin (BTC), ether (ETH) and tether (USDT) are especially risky for financial institutions, the banks said. NFTs were mentioned, as well.

To guard against bad actors, the MAS told banks to consider whether the digital payment token service provider counterparties obscure customer transactions. And for “enhanced due diligence,” banks may have to do “site visits or walkthroughs of client’s AML/CFT [anti-money laundering/combating the financing of terrorism] processes and controls,” the MAS said. 

Last week, the Singapore entity said in a paper it aims to restrict such providers from “facilitating lending and staking of DPT tokens by their retail customers.”

The MAS also pointed out that the very nature of how permissionless blockchains work provides an easy way for banks to monitor activity.

“Blockchain analytics tools provide insights into the on-chain activity, thereby providing an opportunity for [financial institutions] to integrate the same into their overall risk management framework,” the MAS wrote. [Financial institutions] may consider using insights from such tools to facilitate holistic risk management across off-chain and on-chain activity pertaining to their clients.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png


With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.


Tokenized RWAs might not sound sexy, but there’s no doubting the demand


Gary Gensler’s SEC won’t sue Consensys over Ethereum’s potential status as a security after all


The QT taper begins this month…but what does that mean for markets?


Plus, the rise of RWAs could bring about a significant shift in how real-world investments are managed and accessed


The distributed cell plan provider started selling its own hotspots in October 2023


The Brazil-based asset manager’s filing comes during a year of milestone bitcoin and ether fund approvals