On 28 January 2020, the Payment Services Act (“PS Act”) came into force and aims to enhance the regulatory framework for payment services in Singapore. The PS Act adopts an activity-based licensing framework in recognition of the different kinds of activities and new developments in payment services. It also expands Monetary Authority of Singapore’ (“MAS”) regulatory ambit to include new types of payment services, such as digital payment token services.
The three types of licences set out in Section 6 of the PS Act are as follows:
1. Money-Changing (“MC”) licence – for carrying out money-changing service
2. Standard Payment Institution (“SPI”) licence – for conducting payment services below the specified
3. Major Payment Institution (“MPI”) licence – for conducting payment services without being subject to
the specified thresholds
The table below describes payment services under the PS Act.
Activity A – Account issuance service
The service of issuing a payment account or any service relating to any operation required for operating a payment account, such as an e-wallet (including certain multi-purpose stored value cards) or a non-bank issued credit card.
Activity B – Domestic money transfer service
Providing local funds transfer service in Singapore. This includes payment gateway services and payment kiosk services.
Activity C – Cross-border money transfer service
Providing inbound or outbound remittance service in
Activity D – Merchant acquisition service
Providing merchant acquisition service in Singapore where the service provider processes payment transactions from the merchant and processes payment receipts on behalf of the merchant. Usually, the service includes providing a point-of sale terminal or online payment gateway.
Activity E – E-money issuance service
Issuing e-money to allow the user to pay merchants or
transfer to another individual.
Activity F – Digital payment token service
Buying or selling digital payment tokens (“DPTs”) (commonly known as cryptocurrencies) or providing a platform to allow persons to exchange DPTs.
Activity G – Money-changing service
Buying or selling foreign currency notes.
What is Digital Payment Token?
According to the definition of from PS Act, a digital payment token means any digital representation of value that:
Is expressed as a unit;
Is not denominated in any currency, and is not pegged by its issuer to any currency
Is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods and services or for the discharge of a debt;
Can be transferred, stored or traded electronically; and
Satisfies such other characteristics as MAS may prescribe;
What type of licence is needed to provide digital payment token services in Singapore? What are the key regulations and guidelines when providing DPT services?
The provision of digital payment token services in Singapore is regulated under the PS Act administered by MAS. All service providers will require to apply as a major payment institution or standard payment institution with Activity F – Digital payment token service if they wish to provide such services.
MAS has published key notices and guidelines revolving around the prevention of money laundering and countering the financing of terrorism, business conduct and risk management practices expected of a payment services provider.
Given the rise in the popularity of digital assets and the inherent risks involved, regulators have increased their focus on the consideration of the regulations surrounding it. MAS issued Guidelines on Provision of Digital Payment Token Services to the public (“Guidelines”) on 17 January 2022 which introduced certain restrictions around the promotion of DPT services in public areas including:
No placing of any form of advertisements or promotional materials in public areas in Singapore
No engagement of third parties to promote DPT services to the general public in Singapore
No provision of in-person access to DPT services through automated teller machines in public areas
No promotion of payment token derivatives as a convenient alternative to trading in DPTs or misleading the public that such derivatives are less risky than DPTs
As the cryptocurrency revolution has been gathering pace globally, it is not surprising that regulations surrounding the use of DPTs will continue to evolve from here. Investors, managers and other stakeholders should be mindful of the changing regulatory landscape and the risks involved before embarking on DPT.
Established since 2013, Lymon has been providing regulatory compliance and risk management services to financial institutions and their fund products. To find out more about how we can assist with your regulatory or structuring needs, do reach out to your usual contact at Lymon or our specialist below:
Jovi Gan, Director
+65 6709 4110