User protection requirements for DPT services

What are the user protection measures (other than AML/CFT) applicable for DPT service providers?

At the moment, these are the general measures that DPT service providers have to comply with:

According to MAS (Guidelines)
last revised on 17 January 2022

1.2 Under the Payment Services Act (“PS Act”), entities which provide services relating to DPTs are regulated primarily for money laundering and terrorism financing risk, as well as technology risk. Customers of regulated entities must be informed of the risks of trading in DPTs under the PSN08 Notice on Disclosures and Communications but are otherwise not subject to any statutory protection for their trading of DPTs.

However, after the Payment Services (Amendment) Act 2021 comes into effect, DPT service providers will have to comply with additional measures:

"New power to impose user protection measures on certain DPT service providers: To ensure the safekeeping of customer assets held by DPT service providers, MAS may impose (but is not confined to) measures such as:

  • Anti-commingling measures to require a DPT service provider to segregate customer assets from the licensee’s own assets;
  • Ring-fencing customer assets to protect them from claims from other creditors in the event of the licensee’s insolvency; and
  • Maintenance of customer assets and licensee’s assets in a prescribed manner (e.g. maintaining a prescribed percentage of customer assets / licensee’s own assets in a cold wallet).

For a start, MAS may impose such user protection measures on major payment institutions as well as standard payment institutions that process transactions that only involve DPTs, where the value of the transactions that only involve DPTs, and other payment transactions processed by the standard payment institutions, is similar to the thresholds set out in section 6(5) of the PS Act. Should such regulation be necessary, MAS will consult the public and industry."

Source: Allen & Gledhill, last revised on 22 January 2020

The new measures to be imposed on DPT service providers can be found in section 3 of the Payment Services (Amendment) Act 2021.