Deadline for comments is 4 November 2024.

The amendments will bring the following activities within the scope of regulation under the Payment Services Act:

• provision of custodial services for digital payment tokens;
• facilitation of the transmission of digital payment tokens between accounts and facilitation of the exchange of digital payment tokens, even where the service provider does not come into possession of the moneys or tokens; and
• facilitation of cross-border money transfer between different countries, even where moneys are not accepted or received in Singapore.

The amendments will empower MAS to impose requirements relating to anti-money laundering and countering the financing of terrorism, user protection and financial stability on digital payment token service providers.

Under transitional arrangements, entities currently conducting activities under the Act’s expanded scope must notify MAS within 30 days, and submit a licence application within six months from 4 April 2024, if they wish to continue the activities on a temporary basis while MAS reviews their licence applications.

The licence application must be accompanied by an attestation report of the entity’s business activities and compliance with anti-money laundering and countering the financing of terrorism requirements, duly completed by a qualified external auditor, within nine months from 4 April 2024.

This isn't an isolated or new effort by the MAS. The Payment Services Act 2019 (PSA) was previously introduced by the MAS in January 2020. The PSA covered both new and traditional payment activities. Building on this, the Paper seeks to expand the PSA and the MAS's regulatory scope to include virtual asset services. One aspect will be harmonising powers; another additional aspect would include expanding activities related to digital token (DT) service providers.

The MAS acknowledges the inherently higher money laundering and / or financing of terrorism risks of DT services owing to the frequency, anonymity, speed and cross-border nature of such transactions. The Paper, along with the PSA, would seek to provide greater security and transparency as digital transactions, digital banks and FinTech move more mainstream.

Additionally, the Financial Action Task Force (FATF) has introduced new anti-money laundering and combating the financing of terrorism standards on virtual assets service providers (VASPs) last year. Jurisdictions where a VASP is created must regulate and supervise it, notwithstanding that the VASP may also be subject to regulations in other jurisdiction where its activities have touchpoints.

Singapore is committed to FATF standards. As such, the MAS's consultation paper proposes the scope of DT services to be widened to include services that ‘actively facilitate’ regulated activities. This is regardless of whether they have possession of the virtual asset. This would cover and be applicable to DT service providers operating both within and outside of Singapore.

Southeast Asia is a booming financial hub with new FinTech models constantly emerging. Virtual asset trading activity is constantly occurring in the region, and consequently, the regulatory environment is seeking to achieve greater certainty. The MAS' proposal would have an impact on financial institutions and FinTech entities regionally headquartered in Singapore seeking to expand within the region. Examples include competitors and DT service providers such as GrabPay and Go-Pay, as they seek to expand out of Singapore and Indonesia respectively. Compliance with digital transaction licencing requirements will be key, and will likely receive significant attention from those in the financial services industry.

The consultation closes on 20 August 2020.

In a press release, MAS said that institutional investors, such as hedge funds and asset managers, are showing interest in payment tokens, such as bitcoin or ether.

According to the regulator, these investors need a regulated product to gain and hedge their exposure to the payment tokens.

Under MAS's proposal now under consultation, approved exchanges will be able to meet the need of investors to manage their exposure to payment tokens while bringing this activity under its regulatory oversight.

Under one requirement, approved exchanges and licensed intermediaries would need to produce information sheets for investors, explaining risk warnings tailored to payment token derivatives.

However, MAS added that payment tokens and their derivatives are not suitable for most retail investors.

"These tokens tend to have little or no intrinsic value, are difficult to value, and exhibit high price volatility," MAS said.

The authority advised retail investors to be cautious when trading in payment tokens and their derivatives as they could lose their investment.

"Additional margins will also be collected from retail investors to introduce more friction in the trading of leveraged payment token derivatives and partially mitigate the risk of losses."

The consultation ends on 20 December 2019.

In a regulator's column, Tan Boon Gin, CEO of SGX's regulatory branch, SGXRegCo, made it clear that if a company listed on SGX is issuing digital tokens, the tokens themselves are not listed on the SGX, and the SGX rules apply only to the company, not the tokens nor their holder.

He went on to say that issuers will be required to make certain disclosures to SGXRegCo to ensure that investors can make informed decisions.

Issuers will be expected to consult with SGXRegCo in advance, provide a legal opinion on the nature of the tokens and an auditor's opinion on the ICO's accounting treatment, both of which need to be from "reputable" firms.

However, SGX may demand additional opinions "to ensure that the relevant statutory requirements are complied with".

• Issuers will also be required to include certain disclosures, including:
• the rationale for, and risks arising from, the ICO;
• how the funds raised will be used;
• what 'know-your-customer' checks will be conducting to address anti-money laundering and terrorism financing;
• the accounting and valuation treatments of the ICO;
• the financial impact on the issuer as well as contingent settlement provisions;
• any impact of existing shareholders' rights.

Issuers can also hold sharing sessions with shareholders to ensure they understand what the ICO entails for it, so that they can make informed decisions.

They also need to ensure that ICOs are "properly accounted for in their financial statements" and that associated risks have been addressed and milestones on utilisation of funds raised have been adhered to.

In addition, if the tokens are securities under the Securities and Futures Act (SFA) additional measures may apply.

Finally, SGXRegCO advised listed companies planning ICOs to seek professional advice, adding that its main concern is how the issuer safeguards its own interest and that of shareholders.

"The issuer’s board is ultimately responsible for maintaining a robust system of risk management and internal controls," Gin warned.