MAS strengthens regulatory measures for digital payment token services

The Monetary Authority of Singapore (MAS) today published its final tranche of responses to feedback received on its proposed regulations for Digital Payment Token (DPT) service providers in Singapore.

The consulted proposals detail business conduct and consumer access measures to limit potential consumer harm. It also stipulates minimum technology and cyber risk management requirements for DPT service providers.

With regard to business conduct, MAS will issue guidance for DPT service providers to implement these measures, which received broad support from a wide range of respondents:

  • Identify, mitigate and clearly disclose potential and actual conflicts of interest;
  • Publish policies, procedures and criteria that govern the listing of a DPT; and
  • Establish effective policies and procedures to handle customer complaints and resolve disputes.

Regarding consumer access measures, DPT service providers should discourage cryptocurrency speculation by retail customers by:

  • Determining a customer’s risk awareness to access DPT services;
  • Not offering any incentives to trade in cryptocurrencies;
  • Not providing financing, margin or leverage transactions;
  • Not accepting locally issued credit card payments; and
  • Limiting the value of cryptocurrencies in determining a customer’s net worth.

In the area of technology and cyber risk, MAS will require DPT service providers to maintain high availability and recoverability of their critical systems, in line with current requirements imposed on financial institutions.

MAS’ regulatory measures on DPT services will be implemented through regulations and guidelines, which will take effect in phases from mid-2024. This will provide an adequate transitional period for DPT service providers to properly implement these measures.

Ms Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS, said:

“DPT service providers have the obligation to safeguard the interests of consumers who interact with their platforms and use their services. While these business conduct and consumer access measures can help meet this objective, they cannot insulate customers from losses associated with the inherently speculative and highly risky nature of cryptocurrency trading.

We urge consumers to remain vigilant and exercise utmost caution when dealing in DPT services, and to not deal with unregulated entities, including those based overseas.”

ZA Bank receives regulatory approval to prepare for US stock trading service launch

Hong Kong virtual bank ZA Bank today announced that the Hong Kong Securities and Futures Commission (SFC) has lifted the previous conditions on the Bank’s licence registration of Type 1 (dealing in securities) regulated activity under which the Bank shall only carry on business of dealing in collective investment schemes.

The Bank plans to roll out U.S. stock trading services in due course upon completion of the pilot trial.

ZA Bank users will soon be able to access a broader range of investment opportunities from stocks and ETFs to ADRs in the U.S. markets with just a few clicks in the ZA Bank App. With its strong tech DNA, ZA Bank is determined to minimise users’ fees with greater efficiency, alongside instant investment account opening for eligible users.

Ronald Iu, CEO of ZA Bank, said:

“ZA Bank aspires to build a future bank for now, one that empowers users to achieve their financial goals with ease and convenience. We are excited to add U.S. stock trading services to our product suite in due course. With exposure to the world’s largest stock market in terms of capitalisation, users can capture the growth potential in some of the most valuable and influential companies across the globe. This marks another key milestone for ZA Bank in our commitment to creating a one-stop digital finance platform for users.”

ZA Bank has been stepping up efforts to enhance its services in the investment space. The Bank officially launched investment fund services in August 2022, and has since collaborated with top international fund managers, including AllianceBernstein, Allianz Global Investors and J.P. Morgan Asset Management, to successfully onboard over 100 investment fund products with an 8-fold growth in total assets under management from the start of this year.

HK watchdog fines Lion Futures Limited $2.8M for regulatory breaches

Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Lion Futures Limited (LFL) $2.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between May 2017 and July 2019.

The SFC’s investigation found that LFL did not conduct any due diligence on the customer supplied systems (CSSs) used by five clients for placing orders during the material time. As a result, LFL was not in a position to properly assess and manage the money laundering and terrorist financing and other risks associated with the use of CSSs by its clients.

In addition, the SFC found that LFL’s failure to put in place an effective ongoing monitoring system to detect suspicious trading patterns in client accounts resulted in its failure to detect 1,098 self-matched trades in five client accounts.

The regulator considers that LFL’s systems and controls were inadequate and ineffective, and failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML Guideline) and the Code of Conduct.

In deciding the disciplinary sanctions against LFL, the SFC has taken into account that LFL’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market.

LFL has taken remedial measures to enhance its internal systems and controls for continuous monitoring and identifying suspicious transactions.

The regulator noted that a strong deterrent message needs to be sent to the market that such failures are not acceptable.

LFL cooperated with the SFC in resolving the SFC’s concerns.