23 November 2017
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New payment services Bill to exemplify ‘risk-specific, activity-based’ approach

TODAY
14 Nov 2017

MAS to publish the Payment Services Bill for public consultation the following week; Bill aims to “right-size” regulations to cater to developments in electronic payments

Noting that financial technology (FinTech) is unbundling the financial services value chain, Monetary Authority of Singapore managing director Ravi Menon said on Tuesday (Nov 14) that regulators may have to take a similar “unbundled” approach to governing the sector.

He also announced that the MAS will publish the Payment Services Bill for public consultation the following week. The Bill aims to “right-size” regulations to cater to developments in electronic payments.

“I suspect, increasingly, we will have to take a more risk-specific approach and an activity-based approach with respect to FinTech,” he said at the Singapore FinTech Festival.

This would entail setting thresholds for when regulation kicks in, calibrating regulatory requirements to specific risks, and applying these requirements to activities rather than entities, Mr Menon said.

Citing the new Bill as an example, he said that licensees will be regulated “according to the activities they conduct, because different activities pose different risks”.

Mr Menon stressed that there were areas — be it new technologies or business models — where regulators “will never know enough”. “This is where the regulatory sandbox comes in — to facilitate experimentation in a contained environment,” he noted.

The MAS launched its fintech regulatory sandbox last year. Giving an update on the initiative on Monday, Education Minister (Higher Education and Skills) Ong Ye Kung said at the festival’s welcome dinner that the central bank has received more than 30 applications to date — half of which did not require the sandbox as it turned out. These solutions did not need any regulatory exemption and they were given the go-ahead to launch, added Mr Ong, who is an MAS board member.

Mr Menon also announced that the MAS and the Massachusetts Institute of Technology (MIT) have agreed on a collaboration that would enable Singapore-based FinTech industry professionals and researchers to “work alongside world-class researchers at the MIT Media Lab to come up with technology solutions to real-world use cases”.

“They will run pilots using distributed ledger technology, cryptography, quantum computing and big data, artificial intelligence, and machine learning,” Mr Menon said.

In a press release, the MAS noted that the partnership would help to strengthen Singapore’s talent pool in the FinTech industry. Financial institutions and FinTech players would be able to participate in the pilots and experiments in a wide range of financial-services projects, it added.

“This collaboration with MIT signals the growing role that cryptocurrencies and blockchain technology are beginning to play in the financial industry,” the MAS said. “It also underscores the value of industry working with academic institutions that can provide unbiased evaluation and feedback and help bring about further innovation.”

MIT Media Lab digital currency initiative director Neha Narula said the institution was “excited to work with an organisation like the MAS which shares our thinking around the impact of open-source, layered architectures and permissionless systems”.

Reiterating that cryptocurrencies and blockchain technology “pose a dramatic change to the existing regulatory landscape”, she said: “They have the potential to reform the global financial system around peer-to-peer transactions, without traditional financial intermediation.”

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