MAS tightens grip on digital payment token service providers with new user protection measures

The Monetary Authority of Singapore (MAS) has launched new measures to keep digital payment token (DPT) service providers accountable against money laundering and terrorism financing.

MAS made amendments to the Payment Services Act and its subsidiary legislation – Payment Services Regulations – on Tuesday (Apr 2) to expand the scope of payment services under the central bank’s regulation.

This is to impose user protection and financial stability-related requirements on DPT service providers, said MAS, one day after announcing the first centralised digital platform, Cosmic, to combat illegal financing and money laundering.

The Payment Services Act will include three more activities under its regulation:

• Provision of custodial services for DPTs;
• 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 monies or DPTs; and
• Facilitation of cross-border money transfer between different countries, even where monies are not accepted or received in Singapore.

The updated scope will take effect in stages from Apr 4.

MAS noted that it will provide transitional arrangements to entities currently conducting activities under the expanded scope.

“Such entities must notify MAS within 30 days, and submit a licence application within six months from Apr 4, if they wish to continue the activities on a temporary basis while MAS reviews their licence applications.

“The licence application must be accompanied by an attestation report of the entity’s business activities and compliance with anti-money laundering and countering the financing of terrorism requirements, duly completed by a qualified external auditor, within nine months from Apr 4,” said MAS, adding that entities not fulfilling the requirements will have to cease the activities when the amendments come into effect. 

The measures on protecting the assets of the customers of DPT service providers, including placing the assets in a trust account for the benefit of customers, maintaining proper books and records, as well as ensuring that effective systems and controls are in place to protect the asset integrity and security, will take effect six months from Apr 4.

The announcement came after the Financial Services and Markets (Amendment) Act 2023 and its accompanying subsidiary legislation commenced on Monday, setting out the legal basis for information sharing on money laundering and terrorism financing among financial institutions.

The Financial Services and Markets Act 2022 was also amended in May 2023 to set out the legislative framework for Cosmic.

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