MAS Implements Stringent Regulations for Digital Payment Tokens and Virtual Asset Service Providers
The Monetary Authority of Singapore (MAS) has announced amendments to the Payment Systems (Oversight) Act (PSA) and other regulations aimed at enhancing the supervision and regulation of digital payment tokens (DPTs) and virtual asset service providers.
Expanded Definition of DPT Services
As of a date appointed by the Minister, the definition of DPT services will be expanded to include:
- The transfer of DPTs
- Provision of custodian wallet services for DPTs
- Facilitating the exchange of DPTs without possession of monies or DPTs by the DPT service provider
This move is expected to bring virtual asset service providers and crypto intermediaries under the regulatory ambit of MAS.
New Definition of “Cross-Border Transfer Services”
The amendments also introduce a new definition of “cross-border transfer services” that includes activities such as:
- Facilitating transfers of money between persons in different jurisdictions
- Even when monies do not flow through Singapore
Service providers must still be licensed and subject to rules and regulations set by MAS, even if the transactions are conducted outside of Singapore.
Financial Sector (FinTech) Regulatory Sandbox Guidelines
Under the Financial Sector (FinTech) Regulatory Sandbox Guidelines, financial institutions and start-ups will have access to a conducive regulatory environment for technological innovation in the rapidly evolving financial technology space. The sandbox program provides a safe and controlled environment for participants to test and develop new products and services before they are released to the market.
Regulation of Digital Token Service Providers
MAS has implemented measures to regulate digital token service providers for money-laundering and terrorism-financing risks. Service providers must comply with reporting requirements under the Cryptographic Funds Act (CDSA) and the Trust Companies Act (TSFA).
Ownership and Licensing Requirements
Individuals who make or offer to make agreements for or with a view to acquiring, disposing of, entering into, or underwriting digital payment tokens may be carrying on regulated activities under the Securities and Futures Act (SFA). Such individuals must obtain a capital markets services licence under the SFA.
Mining
Currently, there are no regulatory prohibitions directly applicable to crypto mining as an activity. However, profits arising from operations that mine cryptocurrencies in exchange for money are subject to income tax. To the extent that the cryptocurrency being mined constitutes a regulated product, it may fall under the regulatory ambit of the SFA.
Border Restrictions and Declaration
There are currently no border restrictions or declarations required with respect to digital payment tokens.
Reporting Requirements
Unregulated entities must comply with reporting requirements under the CDSA and TSFA. Licensed entities under the PSA must comply with reporting requirements, including lodging reports of suspicious activities or incidents of fraud with MAS within five working days.
Conclusion
The amendments aim to strengthen Singapore’s position as a leading financial hub by enhancing the regulation and supervision of digital payment tokens and virtual asset service providers. The move is expected to promote innovation in the FinTech sector while ensuring the stability and security of the financial system.