Update as of 4 January 2021

The Payment Services (Amendment) Bill (now, the “Act“) has been passed in Parliament after its Second Reading on Monday, 4 January 2021. The amendments to the PS Act have not taken effect and will come into force on a date yet to be announced.

On 2 November 2020, the Payment Services (Amendment) Bill (the “Bill”) was introduced to amend the current scope of the Payment Services Act No. 2 of 2019 (the “PS Act”).

According to the explanatory brief issued by the Monetary Authority of Singapore (“MAS”), the Bill seeks to introduce legislative amendments to the PS Act to align Singapore’s current regulatory regime with the guidance issued by the Financial Action task Force (“FATF”) on Anti Money Laundering and Countering the Financing of Terrorism (“AML/CFT”) for Virtual Asset Service Providers (“VASPs”).

Key Amendments in the Bill

1. Regulatory Framework for VASPs

Under the Bill, the definition of Digital Payment Token (“DPT”) services will be expanded to include the following:

• Transfer of DPTs: this will include any service of transferring or arranging the transfer of DPTs;
• Provision of custodian wallet services for DPTs: this will include any conduct of safeguarding or administration of a DPT, or a situation where the service provider has control over the DPT/DPT instrument i.e. private keys/wallets; and
• Facilitating the exchange of DPTs without possession of moneys by the DPT service provider: this will include any service provider that induces or attempts to induce any person to buy or sell any DPT in exchange for fiat or DPTs.

Payment service providers engaging in any of the above DPT services will need to be licensed under the PS Act and be subject to MAS’ AML/CFT regulations.

2. Empowering MAS to impose measures on DPT service providers

Recognising the growth potential of the DPT sector, the Bill ensures that MAS is equipped to implement appropriate measures to mitigate new risks in a timely manner. This includes inter alia:

• imposing user protection measures on DPT service providers for the safekeeping of customer assets; and
• additional measures on DPT service providers where it is in the view of MAS, “necessary or expedient in the interest of the public or a section of the public, the stability of the financial system in Singapore or the monetary policy of MAS”.

3. Cross-border money transfer services

Under the current regime, cross-border money transfer services are only regulated if they accept or receive money in Singapore. This is set to change under the Bill which seeks to further address AML/CFT risks by regulating service providers that broker money transfers between entities in different countries although moneys are not accepted or received in Singapore.

4. Additional Miscellaneous Amendments to the PS Act

The Bill will introduce the following additional amendments to the PS Act:

(a)  allow MAS to prescribe an additional subset of payment services or class of licensees to which the requirement to safeguard customer money can be extended to;

(b)  broaden the definition of domestic money transfer service to include situations where either the payer or the payee is a financial institution (as opposed to the current definition which only includes the situation where both the payer and payee are not financial institutions); and

(c) provide that the general duty to use reasonable care not to provide false information to MAS applies to all persons, whether or not the person is an individual.

Exemption Period of 6 months granted

Payment service providers falling within the regulatory purview of the amended PS Act, or licensees who need to vary their license will be granted an exemption for six (6) months by the MAS as a result of the Bill.

This update is provided to you for general information and should not be relied upon as legal advice.

Contributed by:

Mike Chiam

Partner

T : +65 6220 0325

E : mchiam@pdlegal.com.sg

Nicholas Kwa

Associate

T : +65 6220 0325

E : nkwa@pdlegal.com.sg