Singapore has finalised amendments to the Payment Services Act (PSA) and its subsidiary legislation this week, expanding the scope of regulated activities and introducing more stringent obligations on digital payment token (DPT) service providers.
The changes take effect in stages from today, 4 April 2024, and will bring the following activities within the scope of the PSA:
(i) Provision of custodial services for DPTs;
(ii) Facilitation of the 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
(iii) Facilitation of cross-border money transfer between different countries, even where moneys are not accepted or received in Singapore.
Further, under the amended Act, the Monetary Authority of Singapore (MAS) is empowered to impose obligations concerning anti-money laundering and counter terrorism financing (AML/CTF), user protection and financial stability on DPT service providers. The provisions on safeguarding consumer assets are expected to take effect six months after 4 April 2024.
DPT service providers and crypto firms providing any of the regulated activities are required under transitional arrangements to:
(i) notify the MAS within 30 days;
(ii) submit a licence application within 6 months from 4 April 2024; and
(iii) submit an attestation report of the entity’s business activities and AML/CTF compliance, within 9 months from 4 April 2024
The regulator warned:
Entities that do not fulfil the requirements above are required to cease the activities
In addition, the MAS recently published guidelines on consumer protection requirements for firms engaged in DPT services, with a view to promoting ‘sound and robust practices’ for DPT service providers. The guidelines will take effect on 4 October 2024 and address items including segregation of customer assets, risk management controls, disclosure requirements to customers among other consumer protection measures.
This expansion has been in the works since 2021 and brings much anticipated regulatory clarity to crypto custody players in Singapore.
The latest changes to the Payment Services Act are the culmination of several years of work to expand the scope of Singapore's regulatory regime with respect to crypto related services, and incorporate greater consumer protections in relation to custody and marketing of those services. The legislation itself will no doubt be the subject of careful scrutiny as providers who offer services in Singapore will need to carefully assess the scope of the regulation to determine if they will require licensing in order to continue carrying on business in the city state.
The latest changes to the PSA position Singapore alongside Hong Kong and Japan in APAC in seeking to establish comprehensive and fit for purpose regulatory regimes for crypto-assets.
Written by Steven Pettigrove and Kelly Kim
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