Singapore introduces tougher regulation for virtual payment service providers

Out-Law News | 07 Jan 2021 | 6:10 am | 1 min. read

Virtual payment providers that facilitate the transmission, exchange or storage of cryptocurrencies in Singapore now fall under the regulatory oversight of financial regulator the Monetary Authority of Singapore (MAS) under a new law.

The new regulatory control will apply regardless of whether the providers possess the money or cryptocurrencies involved.

The Bill of the Payment Services Act (PS Act) amendment passed its second reading in Singapore’s parliament, which will extend the scope of current PS Act and will be used to regulate service providers on virtual assets. The Bill will expand the scope of digital payment tokens (DPTs) services in the PS Act to include activities such as helping with the transmission of DPTs from one account to another; safe-keeping services for DPTs, and facilitating DPT exchange when the service provider does not possess the money or cryptocurrency involved.

A digital payment token includes what is commonly referred to as cryptocurrency, a cryptographically protected digital representation of value that is sometimes used as an exchange medium.

According to the Bill any entity that provides services as business in Singapore must be licensed. Cross-border money transfer service will include facilitating transfers of money between people in different jurisdictions, where money is not accepted or received by the service provider in Singapore so that service providers will be regulated by the MAS even if "the moneys do not flow through Singapore", a MAS statement said.

The Bill will enable MAS to protect users by imposing expanded rules and regulations on such virtual payment providers. This includes the requirement for such providers to segregate customer assets from its own assets.

Nathanael Lim of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said: “There is a growing recognition of cryptocurrency as an exchange of value. The increased regulation, while adding a layer of regulatory cost of providers, will also help to give legitimacy to this new form of ‘money’ as we explore further use cases.”