Monetary Authority of Singapore’s New Regtech Grant to Assist Crypto Industry Compliance

This week the Monetary Authority of Singapore’s chief fintech officer Sopnendu Mohanty, announced the regulator’s new RegTech grant in an effort to help financial institutions modernize their regulatory compliance functions. Ian Lee, vice president of business development at Merkle Science, a Singapore-based blockchain transaction risk monitoring and analytics platform, discusses the impact MAS’ commitment will have on the crypto industry and crypto’s transition to becoming a key pillar of the financial ecosystem.

What this means for the crypto industry:

“Arguably, one of the biggest hurdles toward the legitimization of digital assets is abusive and illicit behaviour — both real and perceived — within the industry that governmental bodies around the world are struggling to navigate and manage. Having robust regtech that keeps pace with fast-changing technologies — such as blockchain and cryptocurrencies — is necessary to create a safe environment for innovation and ensure the healthy growth of the industry. 

“While the MAS’ new regtech grant is not targeted at the cryptocurrency sector, the grant will have substantial impacts on the space. Aside from the fact that regtech will be key to accelerating crypto’s transition into the broader financial ecosystem, under the current PSA licensing regime, cryptocurrency exchanges that other service providers that receive a license will officially be labeled as financial institutions, thus qualifying them for this grant. 

“At the same time, the grant encourages regtech solution providers (such as Merkle Science) to continue evolving within this space and drive these startups to offer competitive services. For MAS, it’s another stake in the ground in enabling crypto companies to continue pushing the boundaries of innovation so that a full range of individuals, entities, and services may transact with crypto safely.”

What this means for Singaporean startups and the future of its financial sector

“Regtech solutions are having a difficult time gaining market share here in Singapore and abroad. Oftentimes, startups at their initial stages have to give away their solutions at a low cost — or sometimes even for free — in order to gain traction and receive feedback on their product. With startups’ limited resources, it is difficult for these innovative new startups to compete with larger legacy firms.

“With this new $42 million grant, the MAS is supporting the development of local regtech startups and encouraging innovation in two ways. Firstly, the grant furthers the existing Digital Acceleration Grant (DAG) scheme, which is available to any startup that services financial institutions. Through the extension of the DAG, financial institutions can also use the grant to subsidize their cost of operation. 

“The second, perhaps more interesting feature of this new grant is for regtech providers to pilot their solutions and test for efficacy under a paid model. While the details on this feature have not been released yet, it sounds like there may be subsidies for established companies to use and test the solution before the startup moves the solution to full-scale production.”