The Payment Services Bill provides for a new activity-based licensing system as well as a framework for designating critical payment systems for regulation.
Currently, payment services in Singapore are regulated under the Payment System (Oversight) Act (PSOA) and Money-Changing and Remittance Business Act (MCRBA). Under the new regime, regulation will be determined under the new legislation. The Bill will only take effect when it is published in the Gazette.
As Bryan Tan and Bernice Tian of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com, explained last month, "the existing regime under the two statutes has not been clear on how newer digital payments services and methods should be regulated".
Commenting after the Payment Services Bill was passed in Singapore's parliament, Tan said: "This is a hotly anticipated piece of legislation given the importance of fintech, specifically digital tokens, e-wallets and e-payments. Some of these areas have been crying out for regulatory guidance and oversight and we believe this would be welcomed, although existing players should focus on transitional arrangements."
There are three types of licences that are provided for under the Payment Services Bill – a money-changing licence; a standard payment institution licence, and a major payment institution licence. Businesses wishing to provide payment services in Singapore will need to obtain one of the three licences to do so when the new laws take effect, unless an exemption applies.
Businesses will face different regulatory obligations depending on the type of licence they have.
All licensees must have a permanent place of business, or registered office in Singapore and require approval from the Monetary Authority of Singapore (MAS) in relation to senior director appointments and major changes to shareholdings, and will also be required to notify MAS of certain events, such as legal proceedings, irregularity or change in operations and provide information and reports to MAS upon notice.
However, only major payment institution licensees will be obliged to provide security to MAS for the performance of obligations to end users, and to safeguard moneys received from end users.
Ong Ye Kung, minister for education in Singapore, said: "Technology is transforming the world of payments. In particular, fintech, or financial technology, has opened up opportunities for more convenient, faster and cheaper payments. At the same time, new payment methods give rise to new risks. This has necessitated a review of our regulatory framework. Further, services that were previously provided separately and regulated separately are now merging."
"The Payment Services Bill provides a forward looking and flexible framework for the regulation of payment systems and payment service providers in Singapore. It provides for regulatory certainty and consumer safeguards, while encouraging innovation and growth of payment services and fintech," the minister said.
Inspiration for Singapore's new payment services laws was taken from other jurisdictions, including the UK, Australia, Hong Kong and Japan, he said.