On 21 November 2017, the Monetary Authority of Singapore (MAS) issued a consultation paper on the Proposed Payment Services Bill (Consultation Paper). This follows the consultation paper issued by the MAS on 25 August 2016 regarding the Proposed Activity-based Payments Framework and Establishment of a National Payments Council, which proposed an activity-based regulatory framework to regulate entities operating within the payments ecosystem. Details of the Consultation Paper can be accessed from our client alert here.

This follow up sets out a summary of how the changes to the regulatory framework may affect your existing businesses. Do note that our summary is based on MAS' existing proposals, and therefore subject to change if there are any variations to MAS' proposals.

How Your Businesses Will Be Regulated Under The New Framework

Activity Type

Current Regulatory Framework

New Regulatory Framelwork

Operation of Payment Systems e.g. receiving funds from one entity for transmission to another entity, providing merchant acquisition services, operation of payments accounts etc.

Payment system may be designated as a designated payment system under the Payment Systems (Oversight) Act (PSOA), but this is unlikely unless the system can cause significant impact to the payments or financial system of Singapore.

More commonly, such businesses are likely be licensed as remittance businesses under the Money-changing and Remittance Businesses Act (MCRBA). However, licensing requirements applies only to outbound remittance (i.e. accepting moneys in Singapore for the purposes of transmitting to persons outside Singapore) and not inbound remittance (i.e. accepting moneys outside Singapore for the purposes of transmitting to persons within Singapore).

Please also see providing merchant acquisition services, and operation of e-wallet below.

The MAS will continue to have the power to designate and regulate payment systems which can cause significant impact to the payments or financial system of Singapore, and also where it is necessary to ensure efficiency or competitiveness of the operation of payment systems in Singapore.

Remittance businesses will now be regulated as providing cross-border money transfer services. Licensing requirements will extend to both outward and inward remittance businesses, as well as domestic money transfer services i.e. accepting moneys for the purposes of executing or arranging for execution of certain payment transactions in Singapore, which will now be regulated as providing domestic money transfer services.

Please also see providing merchant acquisition services, and operation of e-wallet below.

Providing Merchant Acquisition Services e.g. providing point of sale terminal or online payment gateway to accept and process payments on behalf of merchant.

Merchant acquisition services per se are not regulated unless they fall within one of the other regulated activities, such as remittance business.

Such activities will now be regulated as providing merchant acquisition services i.e. contracting with a merchant to accept and process payment transactions which results in the transfer of money to the merchant. This is regardless whether the payment service provider comes into possession of money in respect of the payment transactions.

Operation of Stored Value Facility e.g. issuing of stored value such as gift cards, credits etc.

Operation of stored value facilities i.e. operation of facilities purchased or acquired to be used as a means of making payment for goods or services up to the amount of stored value and where payment for goods or services is made by the operator of the stored value facility rather than the user, is regulated under the PSOA.

Operators holding more than SGD 30 million in stored value and which are not single purpose stored value facilities need to obtain approval from the MAS. Other operators need to comply with certain notification requirements to the MAS, and may to comply with certain customer due diligence and anti-money laundering requirements.

Such activities will now be regulated as e-money issuance i.e. issuing electronically stored monetary value that is denominated in any currency that has been paid in advance for the purpose of making payment transactions through the use of a payment account, is accepted by a person other than the person that issues the e-money, and represents a claim on the person that issues the e-money. This does not however include deposits accepted in the course of carrying on deposit-taking business, which is separately licensable under the Banking Act.

Operation of E-Wallet e.g. issuing of payment accounts including accounts used to hold stored value

Operation of an e-wallet per se is not regulated unless it falls within one of the other regulated activities, such as remittance business or operation of a stored value facility.

Such activities will now be regulated as providing account issuance services i.e. issuing a payment account (which is an account used by a user for the initiation, execution or both of payment transactions), or providing services in relation to the operations required for operating a payment account.

Operation of Virtual Currencies Exchange Platform, Buying or Selling Virtual Currencies

Currently, the operation of a platform for the sale, purchase or exchange of virtual currencies, or the carrying on business in buying or selling virtual currencies are not regulated. Virtual currencies refer to any digital representation of value expressed as a unit, that is not denominated in any currency, is a medium of exchange accepted by the public or a section of the public as payment for goods or services or the discharge of debt, and can be transferred, stored or traded electronically.

However, do take note of the distinction between virtual currencies and digital coins or other virtual goods representing other underlying assets, which attract separate regulatory requirements. Our earlier client alert on initial coin offerings may be found here.

Such activities will now be regulated as providing virtual currency services, which includes dealing in virtual currency and facilitating the exchange of virtual currency.

Again, do take note that persons issuing, dealing or facilitating the exchange of digital coins or other virtual goods representing other underlying assets may continue to be subject separate regulatory requirements under other applicable laws.

Money-changing Business

The business of buying or selling foreign currency notes is licensable under the MCRBA as a money-changing business.

Such activities will continue to be regulated as providing money-changing services.

You may need to be licensed under the new framework as a money-changing licensee, a standard payment institution or major payment institution, depending on the type of activity undertaken as well as the level of payment service transactions undertaken in a calendar year. In addition, you may be subject to ongoing compliance requirements (e.g. requirements in relation to anti-money laundering, user protection, interoperability and technology risks), the extent of which may vary depending on MAS' risk assessment of the different types of activities.

However, the MAS is also considering certain exclusions and exemptions from the licensing and compliance requirements for certain types of activities which would otherwise be subject to regulation under the new framework, where the MAS is of the view that the risks posed from such activities are low.

More details of such requirements and potential exclusions and exemptions are discussed in our client alert here.

The current regulatory framework will be replaced with the new regulatory framework, on commencement of the new Payment Services Act. However, the MAS will put in place transitional arrangements.

If you are currently licensed by the MAS under the current regulatory framework, you may not need to re-apply for a licence. For example, existing widely accepted stored value facilities holders and licensed remittance agents will not need to separately apply for a payment services licence, and will have 6 months from the date of the commencement of the new Payment Services Act to inform the MAS of the specific activities that they are conducting; and existing holders of money-changer's licences will be deemed to be money-changing licensees.

If you are currently operating under a licensing exemption granted by the MAS, it will continue to be valid until the MAS varies or revokes the exemption.

If you currently do not require a licence under the MCRBA or approval to hold a stored value facility under the PSOA, but will need to be licensed under the new regulatory framework, then the MAS will grant a 6 months grace period from the commencement of the new Payment Services Act for you to submit your licence application. You will be allowed to continue to provide payment services until your licence application is approved or rejected by the MAS.

You should review your existing and proposed business activities and consider how the changes in the regulatory framework will affect you, including what licences you may require, the compliance requirements, and whether there are any applicable exemptions that you may potentially rely on.