Digital Payment Tokens: Transforming Singapore’s Financial Landscape
- Eastern Mezzanine
- Apr 21
- 2 min read
Updated: May 7
Think the two-factor authentication (2FA) on your banking app is secure? Think again. SMS One-Time Passwords (OTPs) can be intercepted to carry out fraud, and you only catch wind much later as the whole transaction is not fully transparent to you.
This is where digital payment tokens (DPTs) shine. Commonly known as cryptocurrencies, DPTs are digital representations of value that are cryptographically secured on open-source blockchains. This makes transactions secure, transparent, and trackable.
Specific to Singapore, the Monetary Authority of Singapore (MAS) recognises the value of DPTs and supports their development. In turn, Singapore has become a world leader in regulatory framework development for the blockchain and cryptocurrency industry.
What are Digital Payment Tokens?
As previously mentioned, digital payment tokens (DPTs) are digital representations of value that are typically created and stored via blockchain technology.
Some popular DPTs available today are Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and Ripple (XRP). Although DPTs are not legal tender in most jurisdictions, they can still be used for payments and investments.
Regulatory Landscape in Singapore
MAS regulates DPT services under the Payment Services Act (PSA), one of the pioneer regulatory frameworks that account for cryptocurrencies and other digital assets.
Regarded as a balanced and flexible framework, the PSA requires DPT service providers to be licensed by MAS. DPT service providers must also have stringent anti-money laundering and countering-the-financing-of-terrorism measures, including customer due diligence and transaction monitoring.
DPT service providers must also ensure all suspicious transactions are filed with the Commercial Affairs Department (CAD).
Apart from laying the foundations for DPTs to flourish, MAS proactively engages the local finance industry to develop its regulatory frameworks. Starting from November 2022, MAS has actively worked with local banks to build standardised guidelines on how to vet potential customers from the cryptocurrency and digital asset sectors.
Stricter Guidelines for Retail Investors
Despite recognising the merits of DPTs, MAS considers them highly risky and unsuitable for retail investors. While DPT trading is not banned, there are guidelines in place that prohibit public advertisements of DPT services.
A more recent set of investor protection measures published in July 2023 further restricts DPT service providers from facilitating decentralised finance (DeFi) services like staking and lending. These measures also outline that DPT service providers must:
Separate customers’ assets and hold them in trust.
Safeguard customers’ assets.
Reconcile customers’ assets and be stringent with bookkeeping.
Maintain access and operational controls to customers’ DPTs.
Isolate custody of customers’ assets from other business functions.
Be transparent to customers about the risks of holding assets with a DPT service provider.
The Future of DPTs in Singapore
With MAS at the helm, DPTs are here to stay. Though strict in DPT use for retail investors, MAS maintains an impartial stance to shape clear yet fair regulations to guide the industry.
With clear regulatory frameworks and initiatives, MAS will continue to strengthen Singapore’s position as a conducive jurisdiction that supports the growth of DPTs.
