Nature of DPT service
What types of DPT services are regulated under the Payment Services Act?
Digital payment tokens ("DPTs"), commonly known as cryptocurrencies, are defined in the Payment Services Act 2019 as any digital representation of value that is expressed as a unit and is not denominated in any currency or pegged to any currency by its issuer. DPTs serve as a medium of exchange accepted by the public or a section of the public as payment for goods or services or for the discharge of a debt. They can be transferred, stored or traded electronically. A person providing services involving the buying and selling of DPTs, or providing a platform for the exchange of DPTs in Singapore is regulated under the Payment Services Act 2019 and is subject to risk mitigation measures relating to anti-money laundering / countering the financing of terrorism.
MAS has clarified that DPTs are not regulated in themselves and are not legal tender in Singapore. A DPT service provider is required to provide a risk warning to its customers in a format prescribed in the Notice on Disclosures and Communications (PSN08) that applies to licensees and exempt payment service providers.
Legislative changes to the Payment Services Act 2019 have been passed in Parliament to expand the scope of DPT services to include the transfer of DPTs, provision of custodian wallets for or on behalf of customers and brokering DPT transactions (without possession of money or DPTs by the DPT service provider). The changes have yet to come into force. For a summary of the these changes, please click here to read Rajah & Tann Singapore LLP update on "Amendments to Payment Services Act 2019 Tabled in Parliament to Enhance Regulation of DPT Service Providers and Address ML/TF Risks".
Dealing in digital payment tokens and facilitating the exchange of digital payment tokens are regulated in Singapore.
Dealing in digital payment tokens, which consist of the buying or selling of that digital payment token in exchange for any money or any other digital payment token (whether of the same or a different type), except for accepting or using any digital payment token as a means of payment for the provision of goods or services.
Facilitating the exchange of digital payment tokens, which consist of establishing or operating a digital payment token exchange, in a case where the person that establishes or operates that digital payment token exchange, for the purposes of an offer or invitation (made or to be made on that digital payment token exchange) to buy or sell any digital payment token in exchange for any money or any digital payment token (whether of the same or a different type), comes into possession of any money or any digital payment token, whether at the time that offer or invitation is made or otherwise.
Paragraph 3 of the First Schedule, Payment Services Act 2019
"The PSA now regulates entities offering any of the following DPT-related services as digital payment token service providers:
• Buying or selling DPTs;
• Establishing or operating a DPT exchange; and
• Participating in and offering financial services related to the offer and/or sale of a DPT by an issuer.
• Transfer or transmittal of DPTs from one DPT address to another
• Inducing (or attempting to induce) any person to buy or sell DPTs (without the DPT service provider actually accessing any money or DPTs)"
Cryptocurrency services we commonly see such as exchanges and wallets likely constitute a DPT service under the Payment Services Act (PSA). They are subject to risk mitigation measures pertaining to anti-money laundering / countering the financing of terrorism, among others.