Parliament passes Bill to tighten regulations on virtual payment service providers dealing with cryptocurrency

SINGAPORE: Any entity that facilitates the transmission, exchange or storage of digital payment tokens (DPT) - otherwise known as cryptocurrencies - will now have to be licensed following enhancements to the Payment Services Act, which was passed on Monday (Jan 4). 

Such virtual payment providers will be subject to expanded rules and regulations set by the Monetary Authority of Singapore (MAS), said Minister for Transport Ong Ye Kung during the second reading of the Payment Services (Amendment) Bill in Parliament.  

“This will help minimise the risk of DPT service providers being exploited by criminals to launder illicit proceeds or hide illicit assets,” said Mr Ong, who is also a board member of MAS.

MAS currently regulates service providers which deal with the exchange of cryptocurrencies when they possess the money or cryptocurrency.

Under the amendment, the authority's powers are expanded to include regulatory measures on such providers even if they may not posses the money or cryptocurrency involved. 

Speaking on behalf of Minister-in-charge of MAS Tharman Shanmugaratnam, Mr Ong said that the speed and cross-border nature of activities related to the use of such cryptocurrencies have higher inherent money laundering and terrorism financing risks. 

Cryptocurrencies have been gaining popularity since the launch of Bitcoin in 2009. The world's biggest cryptocurrency recorded a value of US$33,670 on Monday.

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The Bill was passed on Monday after a debate which saw 10 Members of Parliament from both sides of the House participating.

“The Bill will broaden the definition of cross-border money transfer service to include facilitating transfers of money between persons in different jurisdictions, where money is not accepted or received by the service provider in Singapore,” said Mr Ong in Parliament.

“That way, such service providers will come under the regulatory ambit of MAS even if the moneys do not flow through Singapore,” he noted. 

Changes to the law will also see the country's central bank provided with the powers to impose measures on cryptocurrency service providers to “ensure better consumer protection and to maintain financial stability and safeguard the efficacy of monetary policy”, said Mr Ong.

The risks posed to consumers are currently insignificant due to the relatively low usage of such cryptocurrencies in Singapore, he said, though he noted this could change as industry players introduce products to attract customers.

“We have seen (the) recent development of new forms of DPTs (whose) values are pegged to stable assets to gain users’ confidence. It is therefore important for MAS to be able to respond to market developments and address new risks in a timely manner,” he said. 

READ: DBS to launch digital exchange as demand for virtual currencies soar

The amendments to the Bill would allow the MAS to impose user protection measures on service providers “when necessary”, he said. 

“This could include, for example, requiring a DPT service provider to segregate customer assets from its own assets,” he said.

The scope of the central bank's power is “necessarily broad” to allow MAS to respond “flexibly and swiftly” in the fast-moving cryptocurrency landscape, said Mr Ong, adding that the authority will consult the industry when drafting subsidiary legislation on the specific measures.

The changes would “enhance the regulatory framework for payment services in line with global regulatory standards and will allow MAS to be nimble and responsive in addressing various risks in the payments landscape,” said Mr Ong.