On 2 April 2024, the Monetary Authority of Singapore (“MAS”) introduced amendments to the Payment Services Act (“PSA”) and its subsidiary legislation to expand the scope of regulated payment services in Singapore.
Starting 4 April 2024, the following activities will fall within the scope of the PSA:
- The provision of custodial services for Digital Payment Tokens (“DPTs”);
- Facilitation of transmission of DPTs between accounts and facilitation of the exchange of DPTs, even where the service provider does not come into possession of the moneys or DPTs; and
- Facilitation of cross-border money transfers between different countries, even where moneys are not accepted or received in Singapore.
The above amendments are part of a slew of changes to Singapore’s DPT ecosystem that were proposed by MAS in 2021 but delayed until now. Due to the speed and cross-border nature of DPT activities, DPT activities often carry higher money laundering and terrorism financing risks. The scope of the PSA was therefore expanded to enhance MAS’ regulatory framework and to allow MAS to impose anti-money laundering and anti-terrorism financing requirements on DPT service providers.
MAS has also announced transitional arrangements for those currently conducting activities regulated by the revised scope of the PSA. Such entities must notify MAS by 4 May 2024 and submit a PSA license application by 4 October 2024. Doing so will allow these entities to continue the newly regulated PSA activities on a temporary basis while MAS reviews their license applications.
According to MAS, all persons providing newly regulated activities under the PSA will have to submit applications, except for:
- Persons who are already licensed for the corresponding regulated activities under the PSA. For example, an existing DPT licensee who also provides newly scoped-in DPT services; and
- Persons operating under the Payment Services (Exemption for Specified Period) Regulations 2019 (“Exemption Regulations 2019”), who are already exempted in respect of the corresponding regulated activities under the PSA.
Licensees and persons operating under the Exemption Regulations 2019 who were not licensed or exempted for the corresponding regulated activity under the newly regulated services will need to submit the application for a licence. Entities interested in notifying MAS that they are conducting the newly regulated activities can submit their notification here.
In addition, the Payment Services Regulations will be amended to implement segregation and custody requirements for DPT services. This includes segregating customers’ assets and placing them in a trust account for the benefit of customers, maintaining proper books and records, and ensuring that effective systems and controls are in place to protect the integrity and security of customers’ assets.
To aid DPT service providers, MAS has also released the “Guidelines on Consumer Protection measures by Digital Payment Token Services Providers” (found here) that sets out MAS’ expectations on the measures DPT service providers should take to adequately protect consumers.
Overall, amendments to the PSA were made to address the often higher money laundering and terrorism financing risks that DPT activities carry, and to allow Singapore to keep pace with changes to international standards. Please get in touch with us if you wish to understand any of the above in more detail or the practical implications of the PSA amendments for your business.
The information provided above does not, and is not intended to, constitute legal advice pertaining to the PSA Amendments; information, content, and materials stipulated above is based on our reading of the amendments and are for general informational purposes only.
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