On 14 January 2019, the Payment Services Act (PSA) was introduced so as to put in place stricter regulations. Some businesses that were affected by this would be crypto businesses as they are now required to apply for a license in order to operate in the jurisdiction.
What is the Payment Services Act?
This Act makes use of a designation regime and licensing framework that recognises the new developments in payment services. Newer payment services like e-money issuance services and digital payment token services are now covered by this legislation. The PSA also empowers the Money Authority of Singapore (MAS) to regulate payment services as well as to mitigate risks.
This new regime lays down a risk-focused designation and modular licensing framework. Under this new regime, a business must have a licence for the class of services provided in Singapore. These services include Account issuance, Domestic Money Transfer, Cross Border Money Transfer, Merchant Acquisition, E-Money Issuance, Digital Payment Token Dealing and Exchange and Money Changing services.
Applying for a License
When applying for a license, there are 3 types of licences that your business should take note of, Money Changing Licence, Standard Payment Institution Licence and Major Payment Institution Licence.
| License | Description | Threshold |
| Money Changing Licence | Businesses are only allowed to provide money changing services | N/A |
| Standard Payment Institution Licence | Businesses are allowed to provide any combinations of the seven defined payment services |
Average over a calendar year |
| Major Payment Institution Licence | Businesses are allowed to provide any combinations of the seven defined payment services |
Average over a calendar year |
Risks to Payment Providers
As identified in the PSA, there are four key risks that are applicable to payments providers such as Anti Money Laundering (AML) & Combatting the Financing of Terrorism, Interoperability, Loss of funds due to insolvency and Technology Risk. based on the PSA, appropriate mitigation measured has been assigned to the different risks.
For AML & CFT, appropriate AML/CFT requirements will be imposed on the relevant licensees through notices issued under the MAS act. Low-risk transactions will be exempted from AML/CFT requirements. As for interoperability, the imposition of access regimes such as participation in common platforms and the use of ‘fair and reasonable’ commercial terms. Licensees should also adopt a common standard to make widely used payment acceptance methods interoperable. The next risk is Loss of Funds due to insolvency, the measures tailored to this would be safeguarding money received from customers through liability, guarantee and trust account and segregation as well as including contractual obligations with safeguarding institutions and additional reporting and monitoring mechanisms. Lastly, we have technology risk, the mitigation measures being governance and implementation of adequate controls in areas such as user authentication, data loss protection and cyber-attack prevention and detection. Depending on the level of licencing, there will be different standards and expectations.
Impact on Cryptocurrency Industry
In June 2020, Singapore authorities had charged a 23-year-old woman for breaking the ban on unlicensed bitcoin sales. She had allegedly bought S$3,350 in bitcoin from the proceeds of an online scam on behalf of a Loan Shark. As she was found with no license, she could be fined a maximum of $88,000 and receive 3 years in prison for not abiding by the PSA, by undertaking unlicensed Digital Payment Token (DPT) services “on the instruction of an unknown person in return for a commission.”
The PSA gives DPT service providers a complete rule book to comply with the MAS’ licensing requirements. Businesses who are seeking to venture into FinTech are strongly advised to seek professional advice from qualified legal practitioners so as to ensure that their proposed activities are in compliance with all applicable regulations in Singapore. Businesses can consider engaging RegTech companies so as to ensure that they are compliant with these new regulations.
Conclusion
The PSA has given the MAS a position as a progressive destination for financial investors and service providers in both the digital and traditional asset sectors. It also provides Singapore with one of the most pragmatic regulatory frameworks to govern cryptocurrency services in the world. Thus, businesses should take the next step in ensuring compliance with these regulations by engaging firms that can help with these regulations such as RegTech firms.
