The authority also announced the successful completion of the first phase of the Global Layer One (GL1) initiative  and plans to develop standards, market practices and governing principles of foundational digital infrastructure for tokenised assets.

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.

The initiatives are:

• a blueprint outlining the infrastructure required for a digital Singapore dollar; 
• expanding digital money trials; and 
• a plan to issue a “live” central bank digital currency for wholesale settlement.

The Orchid Blueprint sets out the technology infrastructure that would be required to facilitate digital money transactions in the future. The blueprint builds on learnings from the Project Orchid industry trials, and identifies the following infrastructure building blocks for the sound use of digital money in Singapore: 

• Settlement ledger - to record digital money transfers, with supporting features such as native programmability and atomic settlement of digital tokens.
• Tokenisation bridge - to connect existing account-based settlement systems with ledgers compatible with tokenised forms of digital money.
• Programmability protocol - to use Purpose Bound Money (PBM) as a common protocol to specify the conditions for the use of digital money. 
• Name Service - to translate between wallet addresses and alternative name identifiers that are readable and meaningful for verification.

To test the broad applicability of PBM and digital money, MAS will expand Project Orchid’s digital money trials . Four new trials will be undertaken with industry players to examine relevant infrastructure components and commercial models:

• tokenised bank liabilities 
• wallet interoperability 
• supplier financing
• institutional payment controls.

To complement the digital money trials by the financial industry involving retail and corporate users, MAS will commence the development of CBDC for wholesale interbank settlement next year. MAS will pilot the 'live' issuance of wholesale CBDCs for the first time, after previously simulating issuance within test environments

The first pilot will involve the use of 'live' wholesale CBDC to settle retail payments between commercial banks. Future pilots could include the use of 'live' wholesale CBDC for the settlement of cross-border securities trade.

The project tested the cross-border trading and settlement of wholesale central bank digital currencies (wCBDCs) between financial institutions, using new decentralised finance (DeFi) technology concepts on a public blockchain.

The project’s proof of concept successfully tested the cross-border trading and settlement of hypothetical euro, Singapore dollar and Swiss franc wCBDCs between simulated financial institutions. The process relied on three elements: 

• A common technical token standard provided by a public blockchain to facilitate exchange and interoperability between the different currencies.
• Bridges for the seamless transfer of wCBDCs between different networks.
• An Automated Market Maker (AMM), which is a specific type of decentralized exchange to trade and settle spot FX transactions automatically. 

MAS said this will "mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT service provider’s insolvency."

MAS will also restrict cryptocurrency service providers from facilitating lending and staking of tokens by their retail customers. 

The requirements are introduced following an October 2022 consultation on regulatory measures to enhance investor protection and market integrity in digital payment token services. Responses to the consultation supported measures for service providers to:

• segregate customers’ assets from its own assets and held in trust; 
• safeguard customers’ money;
• conduct daily reconciliation of customers’ assets and keep proper books and records;
• maintain access and operational controls to customers’ DPTs in Singapore; 
• ensure that the custody function is operationally independent from other business units; and
• provide clear disclosures to customers on the risks involved in having their assets held by the DPT service provider.

MAS is now seeking public feedback on the draft legislative amendments to the Payment Services Regulations to put these requirements into effect. The deadline for responses is 3 August 2023.

MAS will also publish guidelines in due course to support consistent implementation by the industry.

The report also considers how the CPMI-IOSCO principles for financial market infrastructures can be applied to evolving models of digital asset networks, taking reference from industry pilots launched under Project Guardian, which is MAS’ collaborative initiative with the financial industry to test the feasibility of applications in asset tokenisation and Decentralised Finance.  The report is part of MAS’ effort to ensure that "emerging digital asset networks are underpinned by international standards which promote safe and efficient financial market infrastructure." 

MAS also announced an expansion of Project Guardian to test the potential of asset tokenisation across more financial asset classes. To support this, MAS has established the Project Guardian Industry Group, comprising 11 financial institutions which will lead industry pilots in asset and wealth management; fixed income; and foreign exchange.

The project, named Project Mariana, will look at the use of automated market makers for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs between financial institutions to settle foreign exchange trades in financial markets. 

Project Mariana, has three main objectives: 

(i) explore the design and application of automated market makers for wholesale CBDCs; 

(ii) investigate if a supra-regional network could work as an efficient and trusted hub for cross-border settlement; and 

(iii) research wholesale CBDC governance models within that network.

A proof of concept is expected to be delivered by mid-2023.