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Knowledge Highlights 5 September 2024
On 4 January 2021, the Payment Services (Amendment) Bill (“Bill”) was passed in Parliament.
The Bill makes amendments to the Payment Services Act 2019 (“PS Act”) in three broad areas:
The above amendments are aimed at enhancing the regulatory framework for payment services in line with global regulatory standards and allowing the Monetary Authority of Singapore (“MAS”) to be nimble and responsive in addressing various risks in the payments landscape.
Set out below are the amendments to the PS Act explained in the speech delivered at the second reading of the Bill.
Mitigating ML/TF risks
Currently, MAS regulates service providers dealing in DPTs and facilitating the exchange of DPTs where the service provider comes into possession of moneys or DPTs under the PS Act. These are common business models of DPT service providers that operate in Singapore.
The Bill will expand the scope of the PS Act to empower MAS to regulate service providers of DPTs that facilitate the use of DPTs for payments, and may not possess the moneys or DPTs involved. The Financial Action Task Force standards term these service providers as Virtual Assets Service Providers (“VASPs”).
In relation to the regulation of VASPs, the Bill will expand the scope of DPT services in the PS Act to include the following activities:
An entity that provides any of these services as a business in Singapore will be required to be licensed and subject to rules and regulations in subsidiary legislation set by MAS. This will help minimise the risk of DPT service providers being exploited by criminals to launder illicit proceeds or hide illicit assets.
To pre-emptively address ML/TF risk that is outside of the DPT space, the Bill will broaden the definition of cross-border money transfer service to include facilitating transfers of money between persons in different jurisdictions, where money is not accepted or received by the service provider in Singapore. This brings such service providers under the regulatory ambit of MAS even if the moneys do not flow through Singapore.
Imposing measures on DPT service providers
The second set of amendments provides MAS with powers to impose measures on DPT service providers to ensure better consumer protection and to maintain financial stability and safeguard the efficacy of monetary policy.
While the risks to consumers are not significant currently because of the relatively low usage of DPTs, the Minister noted that user adoption of DPTs could gain traction quickly as the industry introduces new products to attract customers, such as new forms of DPTs which values are pegged to stable assets to gain users’ confidence. MAS recognises the importance of being able to respond to market developments and address new risks in a timely manner.
The Bill will empower MAS to impose user protection measures on DPT service providers when necessary. This will augment current powers that allow MAS to require DPT service providers to safeguard customer money from loss in the event of insolvency. An example of a user protection measure could involve requiring a DPT service provider to segregate customer assets from its own assets.
MAS will be empowered to impose additional measures on certain DPT service providers to maintain stability in Singapore’s financial system, safeguard the efficacy of the monetary policy, or where it is in the interest of the public to do so. It is explained in the second reading speech that the scope of this new power is necessarily broad to allow MAS to respond flexibly and swiftly in the fast-moving DPT landscape.
It is expected that MAS will consult the public and industry on subsidiary legislation for the specific measures.
Other amendments to the PS Act
The Bill will make three other miscellaneous amendments to the PS Act:
Background
MAS consulted on the policy changes and draft legislative amendments in December 2019. On 4 November 2020, MAS issued its Response to Feedback Received on Proposed Amendments to the Payment Services Act. MAS reported that respondents were generally supportive of the proposals, with feedback incorporated into the Bill where appropriate.
The Bill was introduced in Parliament on 2 November 2020, where on that same day, an explanatory brief was issued by MAS.
Reference materials
The following materials are available on the Parliament website www.parliament.gov.sg and the MAS website www.mas.gov.sg: