SINGAPORE - Digital payment service providers that fall outside current regulatory schemes can expect to be licensed under a new regime that was proposed on Monday (Nov 19) in Parliament.
The Payment Services Bill will broaden the regulatory regime in a move to better safeguard consumers' money, counter terrorism financing and boost cybersecurity measures. It is expected to affect electronic wallets and digital payment tokens such as GrabPay, Bitcoin and Ethereum.
Submitted by Education Minister Ong Ye Kung, who is also on the board of the Monetary Authority of Singapore (MAS), the Bill will bring payment service providers that are currently not regulated by the Payment Systems (Oversight) Act (PS(O)A) and the Money-Changing and Remittance Businesses Act (MCRBA) under the charge of the MAS.
Currently, the two pieces of legislation regulate Singapore's payment services and they govern stored value facilities such as EZ-Link and Nets CashCard and remittances.
But newer payment services and methods, such as digital payment tokens, have become increasingly well-used, and they do not fit neatly with existing rules.
The new Bill will streamline regulation of payment services within a single activity-based legislation, and both the PS(O)A and the MCRBA will be repealed when the new Bill comes into force by the end of next year (2019). It has gone through two public consultations since August 2016.
According to the MAS, the Payment Services Bill comprises two parallel regulatory frameworks.
The first is a designation regime that allows MAS to name and regulate payment systems that are crucial to financial stability, which the PS(O)A now allows MAS to do.
The second framework is a mandatory licensing regime for payment service providers which is based on the activities they will be conducting. They need only one licence to conduct one or more activities.
Activities to be regulated by the Bill include the issuing of accounts and electronic money, the transfer of money within and out of Singapore, the acquisition of merchants who will use their platform, money changing and the dealing in and exchange of digital payment tokens such as Bitcoin.
The activities carry different risks, and MAS will regulate the activity according to the risks.
For example, licensees that are allowed to acquire merchants must ensure that funds in transit are safeguarded while those who can issue accounts must protect access to funds and personal electronic wallets.
To conduct these activities, payment service providers must apply to be one of three licensees: a money-changer, a standard payment institution or a major payment institution.
Money-changers and standard payment institutions will be regulated primarily for money laundering and terrorism financing risks while major payment institutions will be regulated more comprehensively, according to an MAS statement on Monday.
Money-changers currently licensed under the MCRBA will still only be able to change money under the new Bill.
Payment service providers can apply to be a standard or major payment institution, depending on their transaction volumes.
Standard payment institutions are not allowed to transact more than $3 million a month. They also cannot hold an electronic money float of more than $5 million. Those who deal in amounts in excess of that must apply to be a major payment institution.
The MAS will allow up to 12 months for payment service providers to comply with the changes after the new Act is in force . Those who provide digital payment tokens will be given six months to comply.
Mr Lukas May, head of banking at TransferWise, a global fintech company that specialises in international money transfers, welcomed the proposed changes, but noted: "The proposed cap on e-wallet balances is not necessary because all customer funds must be safeguarded, so they are not at risk."