Guidelines for Digital Payment Token Services

On 17 January 2022, the Monetary Authority of Singapore (“MAS”) issued Guideline No. PS-G02 (Guidelines on Provision of Digital Payment Token Services to the Public) (the “Guideline”).

The Guideline emphasises that Digital Payment Token (“DPT”) service providers (entities licensed to or exempted from providing digital payment token services under the Payment Services Act) ought to understand that trading DPTs is highly risky and not suitable for the general public, and that DPT service providers ought to conduct their businesses in cognisance of the same.

The Guideline highlights the following issues:

(a)   DPT service providers ought not to promote their DPT services in public areas or in any manner directed at the general public;

(b)   DPT service providers ought not to provide physical ATMs in public areas facilitating public access to their DPT services; and

(c)    derivative contracts that reference DPTs as underlying assets (“Payment Token Derivatives” or “PTDs”) are not regulated by the MAS and can only be offered through a legal entity which is not licensed under the Payment Services Act.

Promotion of DPT Services to the Public

DPT services cannot be promoted in public areas or to the general public. Forms of promotion explicitly highlighted by the MAS in the Guideline include – promotional materials in public transport venues, broadcast media, periodical publications, third-party websites, social media platforms (promotional banners or pop-up advertisements targeted at the general public or specific consumer segments), public events, roadshows, engagement of social media influencers, etc.

Further, MAS has warned DPT service providers not to portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs. Doing so would be contradictory and inconsistent with such service providers’ risk disclosure obligations in accordance with MAS Notice No. PS-N08 (Notice on Disclosures and Communications) in stating the high risk associated with transacting in DPTs.

DPT ATMs

MAS views the provision of automated teller machines (“ATMs”), in public areas, by DPT service providers, as a form of promotion to the public. Therefore, DPT service providers should not set up physical ATMs providing access to their DPT services in public areas.

Payment Token Derivatives (PTDs) are not regulated by MAS

PTDs (such as Bitcoin derivatives viz. Bitcoin options) are derivatives contracts that reference DPTs as underlying assets. MAS does not regulate PTDs unless offered on regulated market operators or approved exchanges.

Regardless, DPT service providers should not promote PTDs as an unregulated alternative to trading DPTs, and should also make clear to their customers that the provision of PTD services is not regulated by MAS.

It is noteworthy that PTD services may only be offered by legal entities that are not licensed under the Payment Services Act. Consequently, DPT service providers licensed under the Payment Services Act cannot offer PTD services.

Reference Materials:

• PS-G02 Guidelines to Digital Payment Token Services to the Public
• PS-N08 Notice on Disclosures and Communications
• Response to Feedback Received on Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens
• FAQs on the Payment Services Act
• Payment Services Act 2019 (2020 Rev. Ed.)

This update is provided to you for general information and should not be relied upon as legal advice.