The Payment Services (Amendment) Bill (PS Bill) was introduced in the Parliament of Singapore on 2 November 2020. The PS Bill proposes to amend the Payment Services Act (PS Act) to expand the regulatory coverage of digital payment token (DPT) and money transfer services and to grant additional powers to the Monetary Authority of Singapore (MAS) to impose user protection measures for customer assets.
The PS Bill seeks to align Singapore’s regulatory framework with the international standards of the Financial Action Task Force (FATF) to address emerging risks relating to money laundering and terrorist financing (ML/TF) involving virtual assets. The PS Bill would also enable MAS to better respond to the risk of loss of money and tokens owed to consumers or merchants due to insolvency, risks related to fragmentation of the e-payments ecosystem and limitations to interoperability, and technology and cyber risks.
The PS Bill is largely consistent with the consultation paper on the PS Act published by MAS on 23 December 2019. (For additional information, please see our article on that consultation paper.)
The PS Act currently regulates two types of DPT services: dealing in DPTs (that is, buying and selling DPTs) and facilitating the exchange of DPTs where the service provider comes into possession of money or DPTs. The PS Bill will expand the definition of DPT service to include:
a. transferring, or arranging the transfer of, DPTs between two accounts, regardless of the location of either account;
b. safeguarding and carrying out instructions regarding DPTs controlled by the service provider (for example, custodian wallet services);
c. facilitating the exchange of DPTs without possession of moneys or DPTs by the service provider; and
d. brokering DPT transactions.
MAS views VASP activities as inherently more vulnerable to ML/TF risks due to their cross-border nature, speed and anonymity. The PS Bill aims to address those risks by subjecting those activities to MAS’s anti-money laundering and combating the financing of terrorism (AML/CFT) regulations and licensing requirements.
The PS Bill expands the definition of cross-border money transfer service to cover a service provider that actively facilitates cross-border money transfers between entities in different countries, regardless of whether money is accepted or received in Singapore. The expanded definition aims to deal with the ML/TF and reputational risks that such activities may present through licensing and MAS’s AML/CFT regulations.
The PS Bill also broadens the scope of domestic money transfer service to include scenarios where either the payer or payee is a financial institution.
As the DPT sector evolves, the development of new DPTs, including stablecoins, could lead to user adoption of some DPTs gaining traction quickly. To enable MAS to mitigate new risks in a timely manner, the PS Bill provides powers for MAS to impose:
a. user protection measures to ensure the safekeeping of customer assets; and
b. measures necessary or expedient to protect the public, the stability of Singapore’s financial system, or Singapore’s monetary policy.
The PS Bill also clarifies that MAS may prescribe additional licensees or subsets of payment services or classes of licensees that must safeguard customer money.
The PS Bill reflects MAS’s intent to re-calibrate the payment services regulatory regime to address the broader adoption of DPTs and emerging ML/TF risks. Businesses in the DPT sector should assess whether their activities would be caught by the expanded scope of regulation and should adapt their compliance strategies accordingly.
OrionW regularly advises FinTech clients on payment services regulation and licensing matters. For more information about the Payment Services Act, or if you have questions about this article, please contact us at email@example.com.
Disclaimer: This article is for general information only and does not constitute legal advice.