A. Introduction
Part 9 of, the First and Second Schedules to, and related sections of the FSMA regulating DTSPs will come into force on 30 June 2025.
These provisions seek to regulate DTSPs not covered by existing laws such as the Payments Services Act 2019 ("PS Act"), the Securities and Futures Act 2001 ("SFA"), and the Financial Advisers Act 2001 ("FA Act").
FSMA will apply to:
(i) Individuals or partnerships, which form a place of business in Singapore;
(ii) Singapore-incorporated entities which,
provide digital token services outside Singapore.
No transitional arrangements will be granted. Hence, DTSPs caught by FSMA must cease or suspend relevant activities by 30 June 2025 unless licensed. MAS has however indicated that it will only grant a licence in extremely limited circumstances, and this would in any case not be possible in 3 weeks.
This note seeks to highlight several key considerations for business that provide services especially for digital payment tokens. For simplicity, we do not specifically address security tokens.
MAS has clarified that tokens which are purely utility tokens and governance tokens are not covered by FSMA – but we note that there is often an question when a token may constitute a payment token, given that sponsors of projects involving tokens may in fact wish to encourage or promote the use of their ecosystem's tokens for the payment of goods and services.
We seek to concisely address the topics below, which we believe to be likely of interest to businesses:
- The territorial scope of FMSA
- The scope of regulated activities under the PS Act and FMSA, including in relation to arranging, inducing and custody/safeguarding/carrying out customers' instructions
- The activity of advising on digital tokens
- The technical services provider exemption
Given the very high hurdle to obtaining a FSMA licence indicated by MAS, we believe the more relevant consideration for businesses is whether its activities fall outside FSMA.
B. Territorial scope of FSMA
MAS stated in its recent 30 May 2025 statement announcing the commencement date of the DTSP Provisions that factors such as whether a DTSP's front-office or customers are overseas will inform whether digital token services are "provided outside Singapore".
In a 6 June 2025 Statement, MAS further sharpened its comments to state that DTSPs providing digital token services solely to overseas customers must be licensed under FSMA.
MAS maintains that this position has been consistently communicated since 14 February 2022 (when it first introduced FSMA into Parliament, and responded to earlier consultation exercise) and reiterated in October 2024 and May 2025.
However, in our opinion, MAS' earlier responses, such as its Response to Feedback on its Consultation Paper on a New Omnibus Act for the Financial Sector of 14 Feb 2025 had pointed to greater nuance and ambiguity, and perhaps even a different legal position.
For example, MAS observed that it had been asked:
"Two respondents asked what "outside of Singapore" meant, and whether this referred to where the potential digital token ("DT") service licensees' customers were located."
In turn, MAS replied:
"In response to the query on what "Outside of Singapore" means, MAS views "Outside of Singapore" as referring to the provision of the DT service outside of Singapore. Such persons would be required to be licensed under the FSMA. Persons who provide DT services "in Singapore" would be required to be licensed, exempted from licensing or already licensed under the SFA, FAA and the PS Act and will be excluded from the ambit of the FSMA."
It may be noted that this response, for example, had made no mention at all to the location of the customer, but instead drew a comparison with the territorial ambit of existing regulatory statutes, including e.g. the PS Act.
In turn, in MAS' PS Act FAQs Q/A 13, MAS in explaining the territorial scope of the PS Act which applies to entities providing services "in Singapore" and which appeared to focus more on the location of the provider's operations, citing examples such as having a physical office or employees in Singapore.
"There are a number of factors which MAS will consider in determining whether a person is providing a payment service "in Singapore" and we have listed some clear examples below. The list is not exhaustive, and we will assess the facts for each licence application on a case-by-case basis. Examples of when a person provides a payment service "in Singapore":
i. The person operates its business providing the payment service in Singapore out of a physical location in Singapore.
ii. The person operates its business providing the payment service in Singapore with employees located predominantly in Singapore."
One consideration for businesses therefore is to carefully consider which statutory regime in fact applies to it on territorial grounds, of course giving full regard to MAS' statements reflective of its current interpretation of the scope of FSMA and the PS Act (which we believe to have in fact evolved after the enactment of FSMA, with respect to MAS' assertions) as well as the technical merits of its position based on its own specific facts and circumstances.
MAS has directly approached a number of businesses where it believes (based on its current analysis and information known to it) may fall under FSMA, but the issue also has wider application to other service providers who have not been approached by MAS to date, but who may have hitherto be operating e.g. on the basis of one of the regulatory exclusions or exemptions discussed below.
C. Are my business's activities within the expanded scope of regulated activities under the PS Act (from April 2024) and FSMA (from 30 June 2025)
When first enacted in 2019, the PS Act only regulated a narrow range of digital payment token services, namely buying and selling DPTs and operating a DPT exchange.
However, the PS Act was considerably expanded with effect from April 2024 to cover a much broader range of digital payment token services (and this scope now aligns closely with FSMA). These include (amongst other things):
i. Arranging for transmission of digital tokens between accounts.
ii. Inducement to enter agreements to buy/sell DPTs.
iii. Custody or safeguarding of digital tokens/instruments where the provider has control of the digital tokens/instruments.
Businesses especially those which provide operational services from Singapore may wish to (re)assess whether their activities with touch points to Singapore fall within the above categories of regulated activities.
D. Advisory Services under FSMA vs FA Act
FSMA covers advice on digital tokens, including directly or through publications, analyses, and reports.
By contrast, the FA Act regulates advice on "investment products", which excludes many types of digital tokens.
Businesses providing advisory services in relation to digital tokens may wish to (re)assess whether FSMA or FA Act applies, based on the nature of the tokens and the territorial scope of their business.
E. Technical Service Provider Exemption
FSMA excludes services by "technical service providers" that do not possess money or digital tokens, such as:
- Data processing/storage
- IT security/authentication
- Network or device maintenance
The PS Act provides for a similar exemption, but interestingly only requires no money possession, and makes no reference to possession of digital tokens.
The expression "technical service provider" is not defined, so businesses should carefully assess whether their activities qualify for this exemption as being technical in nature only, including whether they possess money and (where FSMA applies to them) digital tokens.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
