ACCESS Provides Industry Feedback to MAS Consultation Papers on the Payment Services Act

On the 14th of January 2020, ACCESS completed a consultation with members to provide industry feedback to the Monetary Authority of Singapore (“MAS”) on amendments to the Payments Services Act, facilitated by Simmons & Simmons JWS.

Amongst other things, there were robust discussions on the proposed means of aligning the Payment Services Act with the enhanced FATF Standards applicable to Digital Payment Tokens (DPT) service providers, and other proposed amendments, including ways to improve user protection measures and restrictions on certain DPT service providers.

Clear and concise legislation enable the blockchain sector and digital currencies businesses to flourish in Singapore, particularly SMEs and start-ups. As an industry body, ACCESS is committed to work together with MAS to help in developing and enhancing a robust payments framework for secure digital payments adoption. We achieve this by helping facilitate dialogue for our members to share their ideas on how legislation can be shaped with regulators.

We thank all our members for coming to the feedback session to share their ideas.

Update as at 2/2/20:

Below are the industry responses from the MAS Consultation Paper Feedback Session that was submitted by ACCESS, in conjunction with Simmons & Simmons JWS. The following consultations were discussed in the industry feedback session on the 14th of January:

(1) MAS’s consultation on the scope of e-money and digital payment tokens under the Payment Services Act (“PS Act”), and

(2) MAS’s consultation on proposed amendments to the PS Act.

In relation to (1), ACCESS broadly supports the objectives of the amendments to regulate money laundering and terrorism financing risks in Singapore. Nonetheless, to aid the industry’s understanding, ACCESS sought MAS’s further guidance on, among other things, the following areas:

• The difference in scope between the proposed new class of Financial Institutions (“FIs”) and the entities currently regulated under section 5 of the PS Act;
• How market participants should differentiate and categorise their scope of digital payment token (“DPT”) services, given that the proposed widening of definitions are very broad and similar to the existing definitions of dealing and facilitating the exchange of DPT;
• Whether digital payment token exchanges and over-the-counter brokerage services would be required to also apply for licenses to carry out the services of domestic money transfer, cross-border money transfer, and/or account issuance services, where any relevant transfers are only between accounts of the same user;
• What is meant by a service provider having “control” over a digital payment token, especially in the context of decentralised autonomous organisations; and
• The scope of the entities intended to be caught under the phrase “entities that, as a business, provide any service of inducing or attempting to induce any person to enter into … any agreement … with a  view to buying or selling any digital payment tokens”, as it can be potentially broad and catch foreign website operators and social media sites.

In relation to (2), ACCESS was broadly of the view that:

• In most cases, stablecoins should be treated as a subset of digital payment tokens, as stablecoins are different from traditional e-money in that they are widely traded on secondary markets, increasingly have features which e-money typically doesn’t have. Some structures of stablecoins also do not have centralised issuers, so they fall outside the definition of e-money, and are better classified as digital payment tokens;
• It may be difficult to cleanly delineate between retail and wholesale stablecoins, as such it may be difficult to properly distinguish whether a token should be classified as ‘retail’ or ‘wholesale’. This is better classified and assessed by regulating the type of entity issuing the token, eg. if it is a bank, the bank should observe its conduct and other regulatory requirements imposed on it as a banking entity under the Banking Act and relevant notices and guidelines in issuing such tokens to its customers;
• MAS should only require stablecoin issuers to be licensed in Singapore where they are incorporated in Singapore and the issuance and/or custody arrangements are conducted in Singapore;
• Regulatory protections should not involve any measures that issuers (particularly smaller issuers) may have difficulty complying with – for example, blanket requirements to obtain bank guarantees. ACCESS members recognise that many players in the cryptocurrency industry have encountered bankability issues and imposing bank guarantee measures as mandatory requirements would create major barriers to entry for the industry;
• It would be premature for MAS to introduce user protection measures at this stage before MAS has had an opportunity to observe the practices of licensing applicants, and any new rules relating to user protection measures should be in the nature of high-level principles rather than prescriptive requirements, so as to enable market participants to apply a risk-based model according to the scope of services carried out and types of clients involved; and
• Common methods of user protection (e.g. insurance) may not exist, or exist with sufficient coverage, for the crypto industry.  It would generally be difficult for crypto-firms to implement user protection measures on DPTs that are equivalent to those imposed for e-money. MAS should allow the industry a transition period for implementing user protection measures, if any.

On the 28th of January, MAS has formally announced the commencement of the PS Act. ACCESS, together with other industry associations, will be organising workshops on licensing under the PS Act, conducted by MAS representatives. Details of the first workshop can be found here.