MAS issues guidelines on the provision of digital payment token services to general public
On 17 January 2022, the Monetary Authority of Singapore (“MAS”) issued the “Guidelines on Provision of Digital Payment Token Services to the Public” (“Guidelines”) giving effect to MAS’ expectations in relation to the provision of digital payment tokens (“DPTs”), more commonly known as cryptocurrency, to the general public in Singapore. The Guidelines stress that DPT service providers should conduct themselves with the understanding that trading of DPTs is not suitable for the general public.
This article sets out the key features of the Guidelines.
DPT services and service providers
The term “DPT services” includes the buying or selling of DPTs or facilitating the exchange of DPTs, as regulated under the Payment Services Act 2019 (“PS Act”). It should be noted that amendments to the PS Act were passed in Parliament in January 2021 which expand the definition of DPT services to include the transfer of DPTs, the provision of custodian wallet services for DPTs and facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider, when the amendments to the PS Act take effect.
The Guidelines apply to DPT service providers that have been granted a licence under the PS Act, banks and all other financial institutions providing DPT services in Singapore. The Guidelines also apply to entities that have been providing DPT services before the commencement of the PS Act and have notified MAS pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019. These entities are not licensed under the PS Act but are allowed to continue to provide DPT services while their licence application is being reviewed by MAS.
Under the 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 but are otherwise not subject to any statutory protection for their trading of DPTs.
Marketing and advertising restrictions
The Guidelines note that MAS has consistently warned the public that trading DPTs is highly risky and not suitable for the general public. This is because the prices of DPTs are subject to sharp speculative swings. MAS warns DPT service providers to not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs. Additionally, DPT services should not be promoted in public areas in Singapore or through any media directed at the general public in Singapore.
The MAS press release on the issuance of the Guidelines notes that some DPT service providers have been actively promoting their services through online and physical advertisements or through the provision of physical automated teller machines (“ATM”) in public areas. This could encourage consumers to trade DPTs on impulse, without fully understanding the attendant risks.
The Guidelines clarify MAS’ expectations that DPT service providers should not engage in marketing or advertising of DPT services:
- in public areas in Singapore such as through advertisements on public transport, public transport venues, public websites, social media platforms, broadcast and print media, or provision of physical ATMs; or
- through the engagement of third parties, such as social media influencers or third-party websites, to promote their DPT services to the general public in Singapore, including joint promotional campaigns to solicit new customers.
DPT service providers may promote their services on their own corporate website, mobile applications, or official social media accounts, but must not trivialise the risks of trading in DPTs in a manner that is inconsistent with or contradicts the risk disclosures under the PS Act.
Provision of services relating to DPT-related products
The Guidelines also note that DPT service providers should not promote payment token derivatives contracts (“PTDs”) to the public as a convenient unregulated alternative to trading in DPTs. DPT service providers should not mislead the public that PTDs are less risky than DPTs.
PTDs are derivative contracts that reference DPTs as underlying assets and include contracts-for-differences and futures contracts. MAS does not regulate PTDs unless they are offered by an Approved Exchange under the Securities and Futures Act 2001. Licensees under the PS Act should take all necessary steps to ensure that its customers do not confuse any PTD services associated with the licensee as being regulated by MAS. PTD services may only be offered through a legal entity which is not licensed under the PS Act.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg:
