The Monetary Authority of Singapore (MAS) has enhanced its regulatory framework to address risks related to digital payments, including those involving cryptocurrencies.
Under a bill amending the Payment Services Act (PS Act), which was passed on second reading at the Singapore Parliament last week, virtual payment providers that enable the transmission, exchange or storage of cryptocurrencies in the country now fall under the regulatory ambit of the MAS.
Since the PS Act came into force in January 2020, payment services have evolved rapidly, with a number of innovations and new business models developing. One such development has been in the area of cryptocurrencies such as Bitcoin, which are not denominated in any currency but can be used as a form of payment.
Due to the speed with which digital payment tokens can be used, and their ability to be used across different jurisdictions, the MAS sees the risk of them being used for illegal activities such as money laundering and terrorism.
That being the case, the financial regulatory authority sees the need for them to be regulated, and for service providers to carry out proper due diligence of customers and monitoring of transactions.
The amended bill now extends the scope of the law to cover service providers of virtual assets.
While increased regulation will inevitably lead to higher compliance costs for virtual payment service providers, it would also enhance the validity of digital payment tokens.
In December last year, Singapore’s largest lender DBS launched a digital exchange, providing a platform for the tokenization, trading and custody of digital assets.
It allows institutional investors and accredited investors to carry out spot exchanges from fiat currencies to cryptocurrencies and vice versa, specifically between four fiat currencies (Singapore dollar, US dollar, Hong Kong dollar and Japanese yen) and four established cryptocurrencies, namely Bitcoin, Ether, Bitcoin Cash and XRP.
As part of its digital custody services, the bank will hold cryptographic keys that control digital assets on behalf of clients.