7 December 2020

Several more types of digital payment token (“DPT”) services and cross-border money transfer services will soon be regulated under Singapore’s Payment Services Act 2019 (“PS Act”). On 2 November 2020, the Payment Services (Amendment) Bill (the “Bill”) to expand the scope of these services was introduced into Parliament. The Bill also enhances the regulatory powers of the Monetary Authority of Singapore (“MAS”).  It is likely that these amendments will be effective in 2021.

MAS intends to grant a six-month exemption for entities that are newly regulated as a result of the new amendments. This exemption will also be available for companies that are currently licensed but need to vary their licenses as a result of the new amendments. 

Expanded scope of DPT service

To align the PS Act with the enhanced regulatory standards adopted by the Financial Action Task Force (FATF), the Bill will expand the current definition of DPT service to include the following:

  • Transfer of DPTs
    Regardless of where the DPT service provider locates its operating or computing systems (i.e., to keep its accounts and transaction records), all entities that provide for the transfer of DPT services must be licensed.
  • Provision of custodian wallet services
    DPT service providers that engage in safeguarding or administration of DPTs under its control or a DPT instrument (where the service provider has “control” over the DPT associated with the DPT instrument) must be licensed.
  • Facilitating the exchange of DPTs without possession of moneys or DPTs
    Even where the DTP service provider does not come into possession of moneys or DPTs, the act of facilitating the exchange of DPTs will fall within the expanded definition of DPT service.

Wider definition of cross-border money transfer service

To mitigate against potential reputational, money laundering and terrorist financing (“ML/TF”) risks, the Bill will also broaden the definition of cross-border money transfer service to cover a service provider in Singapore that actively facilitates cross-border money transfers between entities in different countries. The service provider will need to be licensed even if it does not accept or receive moneys in Singapore.

Moving forward

Businesses that deal with DPTs should review their operations and internal policies to assess the potential impact of the expanded scope of regulation. In particular, businesses that will become newly regulated should consider implementing or enhancing know-your-customer checks, transaction limits, staff training and record keeping policies to address ML/TF risks.

If you have further questions on the above, please contact Heng Jun Meng of ZICO Insights Law LLC.

This alert is for general information only and is not a substitute for legal advice.


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