New Requirements and Expectations on the Management of Conflicts of Interest for Digital Payment Token Service Providers

Ingenia consultants
April 18, 2024


In late 2023, the Monetary Authority of Singapore (“MAS”) published a response to feedback on proposed digital payment token services regulatory measures. On 2 April 2024, the MAS published a multitude of documents, including updates to the Payment Services Act 2019, the Payment Services Regulations, and various notices that all entities holding a payments services license to provide digital payment token services, so-called digital payment token services providers (“DPTSPs”), are required to follow.

Over the next few months, we will publish articles covering some of these requirements and providing an overview of how a licensed entity can comply. This first paper will cover the requirements for conflicts of interest, as highlighted in the original consultation paper.

Identification and Mitigation of Conflicts of Interest

MAS’ Key Concerns

Consumer Harm

The MAS is concerned about potential consumer harm when DPTSPs and their entities concurrently engage in multiple activities related to digital payment tokens (“DPTs”). This is due to the possible misuse of customer order information.

Own Market Trading

The most significant potential for consumer harm occurs when a DPTSP operates a market and simultaneously trades on that market.

Regulatory Expectations from DPTSPs

No Own Market Trading

DPTSPs and related entities cannot trade on their own market except for matched principal trading (matched principal as cases where the DPTSP doesn’t take the risk on the transaction and does not take any position in their proprietary books) to fulfill customer orders.

Combination of Activities

The MAS sets out the following requirements when a DPTSP operates multiple activities:

  • Where the DPTSP operates a market and acts as a broker, it must set up separate legal entities with separate management teams and disclose to clients the independent nature of the services.
  • Where the DPTSP acts as a broker and trades for its own account, it must implement functional segregation and effective "Chinese walls" to prevent information misuse and make clear disclosures to clients, including how the DPTSP executes orders.
  • Where the DPTSP is issuing its own tokens and has a proprietary holding of tokens listed in the platform/market, it must make enhanced disclosure due to the potential risk arising from its own token listings.

Disclosures must include:

  1. Measures taken to mitigate the risks (including surveillance measures)
  2. Proprietary token holdings at the time of listing
  3. Additional disclosures: Quantum or size of such proprietary holdings and provide periodic updates of these holdings following token listing, which may be useful information for customers.

Options to Mitigate the Conflicts of Interest

For its management of conflicts of interest, a DPTSP should consider the following points:

  1. Identification
    1. Define “Conflict of Interest”: Establish what constitutes a conflict of interest. This could occur when an individual's interests—including those of family, friends, or financial or social factors—compromise his or her judgment, decisions, or actions in the workplace.
    2. Areas of Risk: Identify situations where potential conflicts of interest will likely arise based on the abovementioned risk.
    3. Create Policy on Conflicts of Interest: Develop a comprehensive policy outlining acceptable and unacceptable behaviours, business practices, and consequences. This policy should be comprehensive, explaining what a conflict of interest means, how this can be identified, and what steps would be taken to prevent and manage the risks arising from the conflict, record keeping, and reporting to management.
  2. Disclosure
    1. Transparency: Prompt and full disclosure of any potential conflicts of interest by all involved parties.
    2. Disclosure Forms: Utilize disclosure forms for employees, board members, and other relevant individuals to document potential conflicts of interest on an ongoing basis.
    3. Review Process: Have independent individuals or committees review and assess disclosures.
  3. Management
    1. Avoidance: Whenever possible, remove the source of the conflict entirely by taking the necessary action.
    2. Separation of Roles: Establish clear divisions between potentially conflicting roles. This could involve separate reporting lines, physical separation of teams, or establishing independent committees.
    3. Chinese Walls: Implement information barriers to prevent the flow of sensitive information between parties with conflicting interests. As a prerequisite, you must have separate teams for this.
    4. Oversight: Implement monitoring and auditing mechanisms to ensure compliance and timely identification of new potential conflicts.
  4. Removal
    1. Step Aside: When mitigation strategies are insufficient, individuals with conflicts should isolate themselves from related decision-making processes.
    2. Removal: In extreme cases or where mitigation is impossible, removal of the individual from the position may be necessary.
  5. Culture and Training
    1. Awareness: Regularly educate employees, the board of directors, and stakeholders on identifying and managing conflicts of interest.
  6. Clear Expectations: Set ethical standards and communicate the organization's commitment to upholding them.
  7. Consequences: Communicate and enforce the consequences for non-compliance.

At Ingenia Consultants Pte. Ltd., we supported many clients in drafting policies and procedures, designing controls to comply with regulatory requirements, and assessing and mitigating conflicts of interest.

For any further information, please contact:

Vijay Bharadwaj


Ingenia Consultants Pte. Ltd.