Digital currency, Stored Value Facilities (SVFs), electronic wallets and pretty much any and everything associated with the handling of currency online has (very rightfully) had increasing scrutiny of late, given the rapid adoption of such services and products by consumers, and entrepreneurs and businesses rushing for a slice of the ever-growing pie. With the speed and magnitude of growth seen in the payments and digital currency landscape, especially with sensitivities around currencies and peoples’ lives, it is no wonder that regulators are constantly evaluating and re-writing boundaries within which companies must operate and be compliant with.
Disclaimer: The writer is not legally trained. Everything written in this post is his own opinion, and nothing should be taken as legal advice.
The Payment Services Bill (PSB) submitted on 19 Nov 2018 by Ong Ye Kung (Education Minister, Board Director of Monetary Authority of Singapore (MAS)) and targeted to be enacted at the end of 2019, is aimed to consolidate and replace the existing Payment Systems (Oversight) Act (PS(O)A) and the Money-Changing and Remittance Businesses Act (MCRBA), which were enacted in 2006 and 1979 respectively, broadening the definition of payment service providers that will fall under the charge of the MAS, with the aim of providing a more conducive environment for innovation in payment services, whilst ensuring that risks across the payments value chain are mitigated.
“The Payment Services Bill will enhance the regulatory framework for payment services in Singapore, strengthen consumer protection and engender confidence in the use of e-payments. The Bill also illustrates our shift towards regulation that is modular, activity-based and facilitative of growth and development in the Singapore payments landscape.” – Ravi Menon, MAS Managing Director
So, what is considered a payment service?
The following are payment services for the purposes of this Act:
- providing account issuance services;
- providing domestic money transfer services;
- providing cross border money transfer services;
- providing merchant acquisition services;
- e-money issuance;
- providing virtual currency services;
- providing money-changing services.
which seems pretty much all-encompassing and would affect the likes of Grab, which just days before details of this bill surfaced unveiled its remittance offering under its financial services arm.
It does exclude entities that are “Dealing in limited purpose virtual currency”, which seems to be currency that is geographically constrained to Singapore and also network constrained to only limited goods and services providers. How “limited” this network has to be does not seem to be clear.
In response to a question by Desmond Choo, MP, Tampines GRC, on (a) how Singapore’s regulation on e-money float compare to those of the major global financial centers; (b) what is the progress on the consultation on “user protection measures in electronic payments”; and (c) how will the Ministry protect consumer interests while ensuring Singapore’s competitiveness as an e-payments processing hub, Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of MAS said that the threshold of e-money that will be protected under the PSB will be lowered from S$30M to S$5M. This means that any e-money held by a payment institution will be wholly safeguarded if the average daily float exceeds S$5M, which potentially implies that smaller players can compete more effectively.
It is interesting to note, also, that the bill proposes a ban on cash withdrawals from stored-value balances, a restriction that does not apply to banks. This could potentially be a major headache as top reason for non-adoption of an e-wallet is the fact that without a cash-out option, many of the e-wallets in the market now are effectively just a pre-payment option with the money locked.
Compared to other countries within the region, it seems that regulators in Singapore are taking a more proactive and communicative approach, which should help to instill confidence in players in the sector and hopefully drive more growth in it. Already it seems that there is industry support for the bill, and ultimately consumer protection and trust are arguably the most important factors in the field of online payments and acceptance, which hopefully will be enhanced by the passing of this bill.