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Singapore: Payment Services Act Passed, Regulating Cryptocurrency Dealing or Exchange Services

(Apr. 17, 2019) On January 14, 2019, the Parliament of Singapore passed the Payment Services Act, bringing cryptocurrency dealing or exchange services under the supervision of the Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator. (Payment Services Act 2019, No. 2 of 2019 (Jan. 14, 2019, assented to by the President on Feb. 11, 2019), Singapore Statutes Online.)

The MAS has recognized that technology, in particular FinTech, or Financial Technology, is transforming the world of payments, while new payment methods also give rise to new risks. It therefore reviewed its regulatory framework applicable to payment systems and payment service providers and proposed a new regulatory framework. (MAS, “Payment Services Bill” – Second Reading Speech by Mr. Ong Ye Kung, Minister For Education, on Behalf of Mr. Tharman Shanmugaratnam, Deputy Prime Minister and Minister-in-Charge of the Monetary Authority of Singapore (Jan. 14, 2019) (Second Reading Speech), MAS website.)

Under the Payment Services Act, any entity that provides any type of payment service needs a license entitling the entity to carry on a business providing that type of payment service, unless otherwise exempted. (Act § 5(1).) The Act regulates seven types of payment services, including the “digital payment token service.” (Act First Sched., Pt. 1.)

According to the MAS, the appropriate requirements for anti-money laundering and countering the financing of terrorism (AML/CFT) are to be imposed on relevant licensees through notices issued under the MAS Act. When the Payment Services Act takes effect, all providers of digital-payment-token dealing or exchange services in Singapore must meet the AML/CFT requirements. (Second Reading Speech, supra.)

According to the Act, a “digital payment token” means

any digital representation of value (other than an excluded digital representation of value) that —

(a)  is expressed as a unit;

(b)  is not denominated in any currency, and is not pegged by its issuer to any currency;

(c)  is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt;

(d)  can be transferred, stored or traded electronically; and

(e)  satisfies such other characteristics as the Authority may prescribe. (Act § 2.)

According to the Minister for Education’s speech on behalf of the MAS Minister-in-Charge during the second reading of the Payment Services Bill, “digital payment token services” are “commonly understood as cryptocurrency dealing or exchange services.” The Minister stated that the MAS would become one of the first few financial services regulators in the world to introduce a regulatory framework for digital payment token services. (Id.)

The Payment Services Act and its subsidiary legislation, which would contain substantive license application forms, processes, and procedures, are expected to take effect in the later part of 2019. (Li Chuan Hsu et al., The Payment Services Act and How It Affects FinTech in Singapore, JDSUPRA (Mar. 26, 2019).)