The Monetary Authority of Singapore (MAS) is set to expand its rules and regulations for payment service providers to reduce the risks associated with digital payment tokens (DPT) following the passing of a new law to amend the Payment Services Bill. This was after a debate that lasted around two hours, participated by ten MPs from both sides of the House.
On the first working day of 2021, Singapore’s Parliament approved a bill to impose stricter oversight on virtual payment service providers that support DPTs or cryptocurrencies. The newly passed bill requires all entities that facilitate the storage, transfer, or exchange of DPTs to be licensed under the Payment Services Act.
During the second reading of the bill in Parliament, Minister for Transport Ong Ye Kung said that the new law puts all virtual payment providers under the regulatory powers of the MAS. He also pointed out that the changes will enhance the laws that govern DPTs to make sure that companies that issue such tokens protect the assets of their customers.
“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,” Ong said during the Parliament deliberations. “That way, such service providers will come under the regulatory ambit of MAS even if the moneys do not flow through Singapore,” he added.
Prior to the passing of the bill, the regulatory authority of the MAS only extended to cryptocurrency-transacting payment service providers that are in possession of the money or cryptocurrency. Those that claim to merely serve as liaisons or facilitators of transactions evade regulation.
Aside from granting the MAS more powers, the new legislative measure will also enable Singapore’s Central Bank to broaden its authority to regulate cryptocurrency exchanges including those that claim that the money or tokens used in transactions are not in their position. This change, according to Ong, will ensure the protection of consumers and an enhanced capability of the Central Bank to maintain financial stability and protect monetary policy efficacy.
Cryptocurrencies and DPTs have the potential for use in criminal or illicit activities including online gambling, transactions in the dark markets, terrorism, money laundering, kidnapping, and tax evasion. Ong Ye Kung, who also serves as a board member of MAS, said that there are inherent risks of money terrorism and money laundering in the cross-border nature activities of cryptocurrency use. “This (the bill passed) will help minimize the risk of DPT service providers being exploited by criminals to launder illicit proceeds or hide illicit assets,” Ong added.
On the consumer protection side, the new bill makes it possible for the MAS to impose new rules for payment service providers when necessary. Ong Ye Kung cited as an example the possible imposition of a requirement for DPT service providers to segregate their assets from those of their customers.
The broader powers granted to Singapore’s Central Bank and the MAS are described as “necessarily broad” to enable the government’s financial regulatory bodies to respond swiftly and flexibly in view of the rapidly changing landscape of cryptocurrencies and digital assets.
The legislative changes passed by Singapore are designed to improve the regulatory framework for payment services in the country, in keeping with global standards. Subsidiary legislation may be introduced later on, and Mr. Ong said that authorities will consult industry players during the drafting of relevant new bills.
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