On 30 October 2024, the Monetary Authority of Singapore published the National Anti Money Laundering strategy which made waves in the world of digital finance. Monetary Authority of Singapore announced updates to the Singapore’s Payment Services Act (PSA), which introduce stricter regulations for digital payment token (DPT) service providers and payment institutions. These updates aims to safeguard consumer assets, enforce transparency, and promote responsible advertising in digital finance, reinforcing Singapore’s reputation as a trusted financial center that prioritizes security and consumer confidence.
The project to update the SG PSA has been a year in the making, spearheaded by a team of MAS regulators, compliance professionals, and industry experts who have worked together to design a framework that meets both the demands of a rapidly advancing market and the need for robust consumer protection. Since its inception, this project has focused on ensuring that consumers engaging in digital finance are well-protected, with clear regulatory requirements that uphold transparency and accountability across the sector. With the expanded SG PSA, MAS aims to create a financial landscape that deters high-risk speculative behavior while providing a secure and welcoming environment for both investors and service providers.
The SG PSA’s new provisions bring a series of important regulatory shifts. First, MAS has expanded licensing requirements for firms engaged in digital payment token services. In addition to existing DPT custodians and intermediaries, the updated framework includes entities facilitating token exchanges, cross-border transactions, and other related services, even if they do not directly handle assets. This closes potential gaps, ensuring that all key players in the digital finance ecosystem operate under MAS’s robust standards. The intention is clear; to create a safe, transparent market where all entities are held accountable, building an ecosystem that can effectively support Singapore’s ambitions as a global leader in digital finance.
Another element of the updated SG PSA is the introduction of measures to protect consumer assets. Under the new rules, DPT service providers are required to separate their own assets from those of their customers, safeguarding clients’ funds by holding them in statutory trusts. This asset segregation is designed to protect consumers from financial losses in the event of a provider’s insolvency or operational failure, addressing volatility concern in the highly volatile digital asset market.
Beyond asset protection, MAS has also taken a strong stance on marketing practices within the digital finance space. In an effort to mitigate speculative behavior and protect inexperienced investors from high-risk investments, MAS has limited DPT service providers’ ability to market directly to the public. By curbing aggressive advertising tactics, MAS aims to prevent risky, unregulated practices that can expose consumers to considerable financial risk. The MAS directive on advertising prioritises ethical engagement with its citizens, ensuring that marketing strategies within the digital finance sector are transparent and responsible.
The impact of these regulations, consumers can anticipate an environment where they can invest with greater confidence, knowing that their interests are safeguarded by stringent asset protection measures and that DPT service providers are held to high standards of accountability. With the required asset segregation and marketing restrictions, service providers will need to adapt quickly to align with MAS’s guidelines.
While committed to nurturing innovation in digital payments and tokens, the government has made it clear that responsible oversight is essential. MAS’s expanded PSA framework illustrates how Singapore plans to navigate the complexities of digital finance, by embracing technology and innovation within a secure, regulated space.
