BMA moves ahead with overhaul of payments rules
The Bermuda Monetary Authority is moving ahead with plans to replace the island’s Money Service Business Act with a modern Payments Services Act in the wake of strong industry support for a more flexible and technology-ready regime.
The change comes at a moment when the old MSB framework is no longer keeping pace with how people actually move money, according to the BMA.
Since the pandemic, payments have shifted sharply online, reliance on cash and cheques has dropped, and new players such as digital wallets and platform-based services have entered the market. Many of these businesses do not fit neatly under the MSB rules.
At the same time, stablecoins and other digital payment tools are blurring the line between “money” and digital assets and raising questions about how they should be supervised.
The BMA said a modern framework was needed to keep consumers safe and clarify to firms what rules applied to them.
“The authority aims to balance innovation, trust and safety,” the BMA wrote in the August paper. “The objective is to tailor regulation that considers the current payments industry landscape, protects customers, safeguards the financial systems and improves regulatory efficiency.”
In a stakeholder update released last month, the BMA said feedback on its August consultation paper showed “a high degree of alignment” with its plans to introduce a tiered, risk-based licensing framework covering a wide range of payment activities, from digital wallets to back-end technology providers.
The new act will also create an Artificial Intelligence Payments Hub to help test new models such as programmable payments and AI-driven transaction tools.
The PSA will bring all existing money service businesses into the new regime, with a one-year transition period. Firms not regulated but now falling under the act will have six months to apply for a licence once the law comes into force.
A key change is the creation of three activity categories. Digital Facility Providers will cover entities such as digital wallets and stablecoin-based payment methods.
Payment Handling Providers will cover businesses that receive and pass on customer funds to execute payments, while Payment Technology Providers will include non-custodial, commercially active operators, including payment gateways and checkout platforms.
System-level infrastructure such as Visa and Mastercard networks and decentralised protocols will remain outside the scope.
To match the new changes, the BMA will introduce five licence classes, ranging from testing and pilot stages to full licences for retail, wholesale and reciprocal cross-border business.
Application fees will start at $1,000 for testing licences and $2,266 for all other licence types, with annual supervisory fees set at the higher of $15,000 or 0.0075 of client receipts.
The BMA said it would now move to drafting the rules, codes of practice and guidance needed to implement the new act. Further consultation on the AI Payments Hub and the final legislative text is expected soon.
• For the complete stakeholder letter, see Related Media
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