The Monetary Authority of Singapore (“MAS”) developed the Payment Services Act 2019 (the “PSA”) to provide a forward looking and flexible framework for the regulation of payment systems and payment service providers in Singapore.
The PSA, in force since 28th January 2020, has implemented a new licensing regime to payment providers, exchanges and other platforms dealing with cryptocurrencies and digital payment token providers.
For the purpose of licensing, the following services are considered payment services:
- account issuance services;
- domestic money transfer services;
- cross border money transfer services;
- merchant acquisition services;
- e-money issuance services;
- digital payment token services; and
- money changing service.
Impact on FinTech companies
With such a broad and expansive scope, how does the PSA affect FinTech activities in Singapore?
Issuing a payment account or any service relating to any operation required for operating a payment account, such as an e-wallet (including certain multi-purpose stored value cards) or a non-bank issued credit card. This payment was not regulated previously as a separate activity.
Domestic Money Transfer
Providing local funds transfer service in Singapore. This includes payment gateway services and payment kiosk services.
Cross-border Money Transfer
Providing inbound or outbound remittance service in Singapore. For remittance Licence Holder, the licence will automatically be converted to Major Payment Institution (MPI) in respect of cross-border money transfer service.
Providing merchant acquisition service in Singapore where the service provider processes payment transactions from the merchant and processes payment receipts on behalf of the merchant. Usually the service includes providing a point-of-sale terminal or online payment gateway.
Issuing e-money to allow the user to pay merchants or transfer to another individual. For Approved SVF licence Holder, the licence will automatically be converted to MPI in respect of e-money issuance service.
Digital Payment Tokens
Buying or selling DPTs (commonly known as cryptocurrencies) or providing a platform to allow persons to exchange DPTs.
Buying and selling foreign currency notes. Money-changing Licence will be converted to money-changing licence.
Focus on Digital Payment Tokens, account issuance and e-money
(A) Digital Payment Tokens
Digital tokens have taken on many different and complex characteristics. These range from pseudo-currencies (commonly known as cryptocurrencies) to utility tokens (tokens which allow access to services or products which have been developed) or securities tokens (tokens which had features resembling securities, debts or sophisticated financial instruments or products). Under the PSA, the characteristics or function of the digital token is what determines which relevant licence is to be obtained.
The provision of any service dealing in digital payment tokens or facilitating the exchange of digital payment tokens falls within the ambit of providing a “digital payment token service” under the PSA. Therefore, so long as the service provider provides the service of purchasing or selling such digital payment tokens in the exchange, or the service of establishing or operating a digital payment token exchange for the purposes of offering or providing an invitation to buy or sell any type of digital payment tokens, the service provider will be considered to be providing such a “digital payment token service”, and will require a licence to operate.
Service providers, which only provide or exchange “Limited Purpose Digital Payment Tokens” such as non-monetary consumer loyalty, reward points or in-game assets are exempted from the requirement of applying for a licence.
(B) Payment account and e-money
Platforms with stored values include popular service providers such as Grab Pay, Google Pay, Apple Pay and includes EZ-link and NETS cards. Cards such as EZ-link and Nets were previously regulated under the Payment Services (Oversight) Act, which has now been subsumed into the PSA. The definition of “e-money” in the PSA includes electronically stored monetary value that has been paid in advance to enable the making of payment transactions through the use of a payment account.
This means that operators of these platforms are now considered as operating an e-money issuance service and will therefore be required to obtain a licence under the PSA. Further, if the e-money stored in e-wallets, accounts or cards are used to purchase goods or services, the service provider will be conducting an account issuance service (through the creation of the e-wallets to hold the stored value) and a merchant acquisition service (usage of the stored value within the e-wallets to purchase goods or services).
It should be noted that e-money issuance service providers are subject to further regulations in addition to those under their licence obligations. Entities that carry on a business of providing an account issuance service must ensure that the currency equivalent of the e‑money contained and/or transferred in any period of one year in a personal payment account does not exceed the prescribed amount of S$5,000.00 and S$30,000.00 respectively.
article by Lee Raj Blockchain Lead, Author of ERC1973