Payment Services (Amendment) Bill

Thank you, Leader and Deputy Speaker. Let me repeat.

Where the digital tokens are used by issuers as a way to raise capital from the public, the issuers will be subject to the full set of regulatory requirements applicable for securities issuance, such as the need to issue a prospectus.

Let me address another question by Mr Leon Perera as well as Assoc Prof Jamus Lim. They voiced the concern of small players and licence holders being caught under the consumer protection requirements. But this is where we also need to strike a balance. We want to encourage entrepreneurship but, at the same time, need to protect consumers especially given the current circumstances that DPTs can become more popular, companies can come up with products that are more attractive. And, today, what we are doing, we believe, is an appropriate and calibrated response.

As suggested by several Members, MAS will continue to educate the public on DPTs, through the national financial education programme, MoneySense. We will also explore ways to better reach out to seniors, such as through mainstream media channels, working with agencies such as IMDA and SkillsFuture Singapore, and through the communities. MAS and the CAD have also rolled out consumer education initiatives to raise public awareness of the risks of putting their money in DPTs.

Since 2017, several advisories have been issued to warn the public of the risks and of common tactics used by scammers, to cheat people of their money or make use of them to carry out money laundering activities. We will continue our efforts, together with the industry and the community.

Let me address one more comment on what Mr Louis Chua raised. He said that digital payment uptake is not fast enough. But, actually, digital payment uptake in Singapore is quite rapid. We can see many merchants taking up, individuals using, and this is after years of work putting in place infrastructure such as the FAST and PayNow system, which makes things a lot more convenient. And then, the Singapore Quick Response Code (SGQR), a unified point-of-sale system. So, all these helped create a very strong momentum of digital payment uptake.

But when it comes to hawkers in coffeeshops, they are actually one of the hardest to convert. But we will continue to work on them. There are improvements that we can make including on the software, on the user interface as well as the user experience. This is something that MAS will continue to work with agencies, such as IMDA, to continue to push the process.

Finally, Members asked about the risks to consumers and businesses who accept or hold DPTs for payments or as collateral for lending to DPT owners. As DPTs have little or no intrinsic value, and their market value is highly volatile, they have not taken off in a big way as an accepted payment mode in Singapore. And it is actually quite a sensible outcome.

Mr Don Wee asked for an assurance that DPTs should not be used as collateral to grant working capital loans. Businesses and lenders must understand the nature of DPTs, and those that wish to accept DPTs either as payments or collateral for lending to DPT owners would thus have to bear the risk of value depreciation.

MAS conducts thematic checks on banks’ collateral management practices to ensure that they maintain prudent credit risk management. There are, in fact, many alternatives to facilitate the normal conduct of business.

Mr Saktiandi suggested a scheme similar to deposit insurance, to safeguard customers against potential losses. Mr Don Wee asked whether capital adequacy ratios would be imposed on DPT service providers.

Banks take in deposits and on-lend these funds. They play a critical intermediating role in the economy and are, therefore, subject to stringent prudential regulation and supervision, including deposit insurance and capital adequacy ratios.

DPT service providers are not banks, do not perform similar economic functions or pose similar systemic risks. We should use alternate means in our regulatory toolbox to deal with risks associated with DPT, which is what the Payment Services Act seeks to do. That is why the Payment Services (Amendment) Bill today provides MAS the powers to require DPT service providers to put in place consumer protection safeguards.

Today, under the Payment Services Act, major payment institutions are required to safeguard customer monies by depositing them in a separate trust account, or obtaining either an undertaking or guarantee from a bank in Singapore. Such safeguards currently do not apply to DPT service providers. With the provisions made, MAS will review the need to impose safeguarding measures on DPT service providers.

To ensure all our regulations are not so onerous that we stifle entrepreneurship, let me reiterate the basic architecture of the Payment Services Act, which is that it is risk-based, three different licences, three different tiers, with requirements calibrated to the risk they pose, and taking a modular approach.

Assoc Prof Jamus Lim raised some questions. I want to assure him that the intent of the Act is to regulate entities that are carrying out payment services as a business and not for individuals. I also want to assure Assoc Prof Jamus Lim that DPT service provided in respect of a central bank DPT function is also carved out in the Act currently.

The new user protection powers introduced under section 21A of the Act is to empower MAS to impose user protection requirements when needed. It will not be implemented immediately, as I have explained. The adoption of DPTs remains small in Singapore and it remains that we are regulating for ML/TF.

If MAS was to exercise the powers, the industry can be assured that we will keep to the principle of the Payment Services Act – risk-based, modular. As such, it is likely that requirements will be imposed for major payment institutions first and if we do not detect the same concern for standard payment institutions.

Assoc Prof Jamus Lim also asked about moneychangers and he highlighted that business is affected, and indeed so. But it is really not due to this legislation. Because of COVID-19, tourism has been affected badly, that has affected moneychangers' business quite adversely as well. Also, they are affected by technology, as there are now alternatives to remittances.

We have a six to 12 months' grace period for existing players to transit into the new regulatory framework, so this applies also to moneychangers. So, new applicants that are seeking to enter the market will not enjoy this six months' grace period, which I think is reasonable.

Several moneychangers have made requests to MAS to temporarily cease their licences due to poor business. Several requested for further extensions beyond the six months and MAS will consider their request on a case-by-case basis.

As for higher limit on the stock and flow cap of e-money, as raised by Mr Louis Chua, we will continue to study the issue. These caps are actually enshrined in the main Act, so if there are any changes to remove the caps, we will have to consult and come back to the House to make the necessary changes.

On Mr Leon Perera and Mr Louis Chua's request for a success rate of application for DPT service provider licences, it is too early to provide a representative success rate currently. MAS has received over 300 applications so far. Many require very close consultations, even hand-holding and guidance due to their unfamiliarity with AML requirements and the applicability of the Payment Services Act to their business. So, everyone is learning in this very fast moving and evolving space and MAS will continue to review how best to speed up the process and strike a good balance between encouraging entrepreneurship and regulation.

Mr Deputy Speaker, Sir, the regulatory issues for payment services are multi-faceted and dynamic as the industry continues to innovate and evolve. MAS seeks to ensure that its regulatory regime is aligned with international standards and that it has the necessary tools to respond quickly to market developments. With that Mr Deputy Speaker, Sir, I beg to move.