The amendments will bring the following activities within the scope of regulation under the Payment Services Act:

• provision of custodial services for digital payment tokens;
• facilitation of the transmission of digital payment tokens between accounts and facilitation of the exchange of digital payment tokens, even where the service provider does not come into possession of the moneys or tokens; and
• facilitation of cross-border money transfer between different countries, even where moneys are not accepted or received in Singapore.

The amendments will empower MAS to impose requirements relating to anti-money laundering and countering the financing of terrorism, user protection and financial stability on digital payment token service providers.

Under transitional arrangements, entities currently conducting activities under the Act’s expanded scope must notify MAS within 30 days, and submit a licence application within six months from 4 April 2024, if they wish to continue the activities on a temporary basis while MAS reviews their licence applications.

The licence application must be accompanied by an attestation report of the entity’s business activities and compliance with anti-money laundering and countering the financing of terrorism requirements, duly completed by a qualified external auditor, within nine months from 4 April 2024.

The initiatives are:

• a blueprint outlining the infrastructure required for a digital Singapore dollar; 
• expanding digital money trials; and 
• a plan to issue a “live” central bank digital currency for wholesale settlement.

The Orchid Blueprint sets out the technology infrastructure that would be required to facilitate digital money transactions in the future. The blueprint builds on learnings from the Project Orchid industry trials, and identifies the following infrastructure building blocks for the sound use of digital money in Singapore: 

• Settlement ledger - to record digital money transfers, with supporting features such as native programmability and atomic settlement of digital tokens.
• Tokenisation bridge - to connect existing account-based settlement systems with ledgers compatible with tokenised forms of digital money.
• Programmability protocol - to use Purpose Bound Money (PBM) as a common protocol to specify the conditions for the use of digital money. 
• Name Service - to translate between wallet addresses and alternative name identifiers that are readable and meaningful for verification.

To test the broad applicability of PBM and digital money, MAS will expand Project Orchid’s digital money trials . Four new trials will be undertaken with industry players to examine relevant infrastructure components and commercial models:

• tokenised bank liabilities 
• wallet interoperability 
• supplier financing
• institutional payment controls.

To complement the digital money trials by the financial industry involving retail and corporate users, MAS will commence the development of CBDC for wholesale interbank settlement next year. MAS will pilot the 'live' issuance of wholesale CBDCs for the first time, after previously simulating issuance within test environments

The first pilot will involve the use of 'live' wholesale CBDC to settle retail payments between commercial banks. Future pilots could include the use of 'live' wholesale CBDC for the settlement of cross-border securities trade.

“Today’s announcement of co‑ordinated international action on cryptoassets is a major step forward, marking another important milestone towards the widespread and co-ordinated approach to combat tax evasion through greater transparency and exchange of information,” Secretary-General Cormann said.

“We strongly welcome the extensive support being shown for quick action to make the international exchange of information collected under the OECD standard on cryptoasset reporting a reality. The international community can count on the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes to ensure that the tax transparency architecture remains both up-to-date and effective going forward.”

The Crypto-Asset Reporting Framework (CARF) is a key component of the International Standards for Automatic Exchange of Information in Tax Matters developed by the OECD under a G20 mandate. It provides for the automatic exchange of tax-relevant information on cryptoassets and comes against the backdrop of a rapid adoption of the use of cryptoassets for a wide range of investment and financial uses.

Under MAS’ Project Guardian, MAS collaborated with 15 financial institutions to carry out industry pilots on asset tokenisation in fixed income, foreign exchange, and asset management products. These pilots demonstrated the potential to "reap significant market and transaction efficiencies from the use of tokenisation". 

MAS said that as the pilots grow in scale, there is a need for "closer cross-border collaboration among policymakers and regulators." The regulator has therefore established a Project Guardian policymaker group comprising the FSA, FCA and FINMA . 

The policymaker group will aim to:

a) advance discussions on legal, policy and accounting treatment of digital assets;

b) identify potential risks and possible gaps in existing policies and legislation relevant to tokenised solutions;

c) explore the development of common standards for the design of digital asset networks and market best practices across various jurisdictions;

d) promote high standards of interoperability to support cross-border digital assets development;

e) facilitate industry pilots for digital assets through regulatory sandboxes, where applicable; and

f) promote knowledge sharing among regulators and industry. 

Leong Sing Chiong, Deputy Managing Director (Markets and Development) at MAS, said the partnership "shows a strong desire among policymakers to deepen our understanding of the opportunities and risks arising from digital asset innovation. Through this partnership, we hope to promote the development of common standards and regulatory frameworks that can better support cross border interoperability, as well as sustainable growth of the digital asset ecosystem.” 

The project tested the cross-border trading and settlement of wholesale central bank digital currencies (wCBDCs) between financial institutions, using new decentralised finance (DeFi) technology concepts on a public blockchain.

The project’s proof of concept successfully tested the cross-border trading and settlement of hypothetical euro, Singapore dollar and Swiss franc wCBDCs between simulated financial institutions. The process relied on three elements: 

• A common technical token standard provided by a public blockchain to facilitate exchange and interoperability between the different currencies.
• Bridges for the seamless transfer of wCBDCs between different networks.
• An Automated Market Maker (AMM), which is a specific type of decentralized exchange to trade and settle spot FX transactions automatically. 

The stablecoin regulatory framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency, that are issued in Singapore. Issuers of such SCS will have to fulfill key requirements relating to:

• Value stability: SCS reserve assets will be subject to requirements relating to their composition, valuation, custody and audit, to give a high degree of assurance of value stability.
• Capital: Issuers must maintain minimum base capital and liquid assets to reduce the risk of insolvency and enable an orderly wind-down of business if necessary.
• Redemption at Par: Issuers must return the par value of SCS to holders within five business days from a redemption request.
• Disclosure: Issuers must provide appropriate disclosures to users, including information on the SCS’ value stabilising mechanism, rights of SCS holders, as well as the audit results of reserve assets.

Only stablecoin issuers that fulfill all requirements under the framework can apply to MAS for their stablecoins to be recognised and labelled as 'MAS-regulated stablecoins'.

Any person that misrepresents a token as an 'MAS-regulated stablecoin', may be subject to penalties under MAS’ stablecoin regulatory framework, and placed on MAS’ Investor Alert List.

Ms Ho Hern Shin, Deputy Managing Director (Financial Supervision) at MAS, said, “MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems. We encourage SCS issuers who would like their stablecoins recognised as 'MAS regulated stablecoins' to make early preparations for compliance.”

The UK and Singapore held the 8th UK-Singapore Financial Dialogue in London on 26 July 2023, where they had a useful exchange of views, and identified opportunities for further collaboration on joint projects, in priority areas such as sustainable finance and FinTech and innovation.

MAS said this will "mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT service provider’s insolvency."

MAS will also restrict cryptocurrency service providers from facilitating lending and staking of tokens by their retail customers. 

The requirements are introduced following an October 2022 consultation on regulatory measures to enhance investor protection and market integrity in digital payment token services. Responses to the consultation supported measures for service providers to:

• segregate customers’ assets from its own assets and held in trust; 
• safeguard customers’ money;
• conduct daily reconciliation of customers’ assets and keep proper books and records;
• maintain access and operational controls to customers’ DPTs in Singapore; 
• ensure that the custody function is operationally independent from other business units; and
• provide clear disclosures to customers on the risks involved in having their assets held by the DPT service provider.

MAS is now seeking public feedback on the draft legislative amendments to the Payment Services Regulations to put these requirements into effect. The deadline for responses is 3 August 2023.

MAS will also publish guidelines in due course to support consistent implementation by the industry.