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.

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 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.”

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.

Mamoru Yanase, Deputy Director-General of the Strategy Development and Management Bureau at the FSA, said: "We are delighted to join the Project Guardian as an observer. Decentralized financial ecosystem continues to develop in complexity, and it is important to address emerging risks. Blockchain technology including web3 has a potential to become a strong driver of innovation. We look forward to working with MAS, traditional financial institutions and FinTech firms to further enhance our knowledge in this area."

The report also considers how the CPMI-IOSCO principles for financial market infrastructures can be applied to evolving models of digital asset networks, taking reference from industry pilots launched under Project Guardian, which is MAS’ collaborative initiative with the financial industry to test the feasibility of applications in asset tokenisation and Decentralised Finance.  The report is part of MAS’ effort to ensure that "emerging digital asset networks are underpinned by international standards which promote safe and efficient financial market infrastructure." 

MAS also announced an expansion of Project Guardian to test the potential of asset tokenisation across more financial asset classes. To support this, MAS has established the Project Guardian Industry Group, comprising 11 financial institutions which will lead industry pilots in asset and wealth management; fixed income; and foreign exchange.

This white paper provides a technical overview to the concept of Purpose Bound Money (PBM), which enables money to be directed towards a specific purpose, without requiring money itself to be programmed. PBM features the use of a common protocol that is designed to work with different ledger technology and forms of money. With a standardised format, users will be able to access digital money using the wallet provider of their choice.

The paper, which was developed in collaboration with the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions and FinTech firms, builds upon the concept of PBM, which was first introduced as part of MAS’ Project Orchid and describes how it can be extended to a broader set of use cases. 

The Cedar x Ubin+ experiment examined whether distributed ledger technology (DLT) could be used to improve the efficiency of cross-border wholesale payments and settlements involving multiple currencies. 

The technical research experiment built on previous phases of the NYIC’s Project Cedar research and the MAS’ Ubin+ initiative. It examined a cross-border multi-currency use case in which vehicle currencies are used as a bridge to exchange currency pairs that are not widely traded. 

Cedar x Ubin+ explored the ability of DLT to establish connectivity across heterogeneous simulated currency ledgers, reduce settlement risk, and decrease settlement time. The experiment was conducted in a test environment and the hypothetical payments were settled using simulated wholesale central bank digital currencies.