The Monetary Authority of Singapore ("MAS") has on 17 January 2022 published a new set of guidelines setting out MAS' expectations for digital payment token ("DPT") service providers in relation to the promotion of their DPT services to the general public in Singapore. Essentially, MAS expects that DPT service providers should not promote their DPT services to the general public in Singapore.

MAS' prior comments on the public trading in DPTs

The new guidelines are consistent with the general posture that MAS had adopted in previous warnings and statements. As far back as December 2017, MAS had warned the public of the significant risks of investing in DPTs and had urged the public to take extreme caution when investing in DPTs. MAS had, among other reasons, highlighted the lack of regulatory safeguards for investments in DPTs and the significant volatility of the prices of DPTs.

More recently in November 2021, as part of his speech at the Singapore Fintech Festival entitled "The Future of Money, Finance and the Internet", the Managing Director of MAS (Mr. Ravi Menon) had stated that MAS frowned on DPTs as an investment asset for retail investors. Similar to the public warning above, Mr. Menon alluded to the volatility of prices and highlighted the risk of significant losses for investors who invest in DPTs.

Scope of the new guidelines

Entities which must observe the guidelines

The new guidelines will apply to licensed DPT service providers, exempt DPT service providers (such as banks and other financial institutions) and DPT service providers which are operating pursuant to the transitional arrangement under the Payment Services (Exemption for Specified Period) Regulations 2019. Effectively, all entities which are currently permitted to provide DPT services in Singapore, whether by way of a licence or an exemption, will have to observe the guidelines.

Permitted and non-permitted promotional activities

Firstly, the guidelines state that DPT service providers should not promote their DPT services in public areas in Singapore or through any other media directed at the general public in Singapore. These will include advertisements or promotional materials in public transport, public transport venues, broadcast media, newspapers, magazines, third party websites, social media platforms, public events or roadshows. In relation to social media platforms, the guidelines also discourage the use of promotional banners or pop-up advertisements.

Secondly, the guidelines discourage the promotion of DPT services to the general public in Singapore through third parties. This would include the use of social media influencers or third party websites to conduct joint promotional campaigns to solicit new customers.

Thirdly, MAS considers the provision of DPT services through automated teller machines ("ATMs") to be a form of promotion of DPT services to the general public, and as such, DPT service providers should not permit transactions in DPTs to be made via physical ATMS in public areas in Singapore.

Finally, the guidelines also briefly touch on payment token derivatives ("PTDs"), which are derivatives that reference DPTs as underlying assets. Examples of such PTDs include contracts for differences, futures, or other forms of synthetic contracts attempting to provide fractional or parceled interests in a DPT. As PTDs are typically unregulated products (with the exception of PTDs offered by an Approved Exchange under the Securities and Futures Act 2001), the guidelines provide that DPT service providers should not promote PTDs to the public as a convenient alternative to trading directly in DPTs. DPT service providers must not mislead the public into thinking that PTDs are less risky than DPTs, and must ensure that their customers are aware that PTDs are typically unregulated.

As an exception to the aforementioned advertising restrictions, DPT service providers can promote their services on their own websites, mobile applications, or official social media accounts. However, in promoting their services, DPT service providers must not play down the risks of trading in DPTs which would be inconsistent with or contradict the risk disclosures required under the Payment Services Act 2019 and the MAS Notice PSN08 on Disclosures and Communications.

Impact assessment

The new guidelines concern only DPT services and are thus likely to have the greatest impact on payment service providers that are only offering DPT services. A payment service provider that is also licensed for other forms of payment services will not be subject to the new guidelines in relation to the way it promotes those other payment services. What is perhaps less clear is whether such a payment service provider may cross-market its DPT services to a customer who had initially been onboarded for a payment service other than a DPT service.

Conclusion

Given the speed of development in the DPT industry, MAS will likely continue to actively observe developments in the industry before deciding if any further steps are necessary. We would also expect MAS to make incremental changes to the guidelines to provide the industry with greater clarity on what is permissible and what is not.

While MAS has not gone so far as to limit the provision of DPT services to only accredited investors and institutional investors, DPT service providers should take note of MAS' consistent posture against the retail public trading in DPT, and be prepared for further restrictions when offering DPT services to the public.

 A copy of the new guidelines can be obtained here.

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