On 4 January 2021, Parliament passed the Payment Services Amendment Act 41/2020 (“PS Amendment Act”).
This update summarises the key amendments brought about by the PS Amendment Act:-
- Widening the definition of “digital payment token service”
- Including powers for MAS to prescribe additional requirements on digital payment token (DPT) service providers
- Expanding the definitions of “cross-money transfer” and “domestic money transfer”
Under the PS Act, any person who wishes to provide any one or more of the 6 regulated payment services would be required to obtain and maintain in force a license which entitles that person to carry on a business of providing such payment service(s)1 unless that person is an exempt payment service provider2.
A digital payment token services provider would have to maintain in force a Standard Payment Institution License3 or a Major Payment Institution License (if on average, over a calendar year, of the total value of payment transactions accepted, processed or executed in one month exceeds $3 million, for the digital payment token service or $6 million for the combination of the digital payment token service in addition to other form(s) of payment services).
The PS Act introduces several conditions which a licensee would have to abide by such as having a permanent place of business or registered office in Singapore4 and requirement to keep at its permanent place of business or registered office, books of all the licensee’s transactions relating to the payment service provided5. Providers holding a Major Payment Institution License are subject to more stringent licensing conditions, such as having to maintain with the Monetary Authority of Singapore (MAS) security of a prescribed amount for the due performance of its obligations to its customers6.
- Widening the definition of “digital payment token service”
The definition of “digital payment token service” in the First Schedule of the PS Act was broadened to include:
a. the transfer of DPTs;
b. the provision of custodian wallet services for DPTs; and
c. facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider.The purpose of broadening the definition of “digital payment token service” was to bring Singapore’s regime in line with the enhanced international standards adopted by the Financial Action Task Force in June 2019 that are aimed at addressing money laundering and terrorist financing risks posed by virtual asset service providers. With these amendments, service providers which do not come into possession of moneys or DPTs, may now be regulated under the PS Act, thereby minimising the risk of DPTs service providers being exploited by criminals to launder illicit proceeds or hide illicit assets7.
- Including powers for MAS to prescribe additional requirements on DPT service providers
In addition to the expansion of the definition of “digital payment token services”, the amended PS Act imposes additional requirements on licensees providing digital payment token services.In the new section 21A of the PS Act, new powers are conferred on MAS to prescribe specific regulations that must be satisfied by such licensees, relating to:
a. user protection measures (e.g. the extent of commingling of assets belonging to customers and assets belonging to the licensee, the safeguarding of customer assets in the event of insolvency of the licensee, any insurance against the risk of insolvency of the licensee, safeguards against unauthorised use of customer assets); and
b. any measures which are necessary or expedient in MAS’s view for the interest of the public or section of the public, the stability of the financial system or the monetary policy of MAS. The purpose of new section 21A is to equip 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 in Singapore8.
- Expanding the definitions of “cross-border money transfer” and “domestic money transfer”The definition of “cross-border money transfer” in the First Schedule of the PS Act has been widened to cover a service provider who facilitates cross-border money transfers between entities in different countries although moneys are not accepted or received in Singapore. The previous definition only covers service providers who accept or receive monies in Singapore. The definition of “domestic money transfer”, also in the First Schedule of the PS Act, has also been broadened to include situations where either the payor or the payee is a financial institution. Previously, service providers are not regulated if they merely facilitate transfers from or to a financial institution.
Regulators continue to watch developments in the payment services space closely. The amendments brought about by the Amendment Act demonstrate the close watch by the regulators of developments in this space, as they seek to widen their net to adapt to and even pre-empt fast-moving changes. It is critical for industry players to keep abreast of the updates and changes to the PS Act.
If you have any questions, please do not hesitate to contact our team below or any of your lawyers at Wee Swee Teow LLP.
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Disclaimer: The material in this article is prepared for general information only and is not intended to be a full analysis of the points discussed. This article is also not intended to constitute, and should not be taken as, legal, tax or financial advice by Wee Swee Teow LLP. Any illustrations used in this article may not be applicable or suitable for your specific circumstances or needs and you should seek separate advice for your specific situation. Any reference to any specific local law or practice has been compiled or arrived at from sources believed to be reliable and Wee Swee Teow LLP does not make any representation as to the accuracy, reliability or completeness of such information.
1Section 5 of the PS Act (read with Schedule 1, Part 1).
2Section 13 of the PS Act.
3Section 6(4) and (5) of the PS Act.
4Section 14(1) of the PS Act.
5Section 14(3) of the PS Act.
6Section 22(1) of the PS Act.
7Paragraph 10 of the 2nd Reading Speech.
8Paragraph 12 of the 2nd Reading Speech