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International Financial Services Centres Authority releases consultation paper for regulation of Payment Services and Payment Service Providers.

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International Financial Services Centres Authority released a consultation paper last month on proposed IFSCA (Payment Services) Regulations to regulate Payment Services and their Service Providers. IFSCA is seeking public comments / suggestions on the consultation paper and draft regulation.

The consultation paper aims to regulate the payment service space by envisaging similar guidelines practiced by other regulators in India and globally. The consultation paper clearly differentiates between “payment service” and “payment system”, which are quite often used interchangeably. Payment service being regarded as a service relating to transferring of funds from one payment account to another. While payment system being the infrastructure used for interbank transfer. This was a much-needed clarification, and a step comes in consonance with those adopted in western jurisdictions. UK Payment Services Regulations, 2017 also defines the terms to bring in greater clarity while regulating the Payment Service Providers.

The consultation paper issued by IFSCA shall be a way forward in order to standardise the process of licensing, registration, or any other type of approval granted for the Payment Service Providers. The paper also proposes a governance arrangement to be set up by the Payment Service providers that shall be functioning in GIFT City . Such framework shall also come with a restriction that Payment Service Providers cannot undertake any activity other than payment services unless specific approval has been granted. Furthermore, it also enumerates certain duties that must be safeguarded by the Payment Service Providers relating to segregating the applicable funds from any other fund that it holds under it.

A copy of the Consultation paper on proposed IFSCA (Payment Services) Regulations is attached below.

Readers can also share their views with Regstreet Law Advisors on info@regstreetlaw.com

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