On 30 May 2025, the Monetary Authority of Singapore ("MAS") published its response to feedback on the proposed regulatory approach, regulations, and notices for digital token service providers ("DTSPs") under the Financial Services and Markets Act 2022 ("FSM Act"). This article provides a summary of the key features of the new regime, MAS's clarifications, and practical implications for affected entities.
Scope of the DTSP Regime
The DTSP regime applies to individuals, partnerships, or
Singapore-incorporated entities that carry on a business of
providing digital token ("DT") services
outside Singapore. The regulatory focus is on mitigating money
laundering and terrorism financing
("ML/TF") risks, as well as reputational
risks to Singapore, given the cross-border and internet-based
nature of such services.
DTSPs are (i) individuals or partnerships that are operating
from a place of business in Singapore or (ii) Singapore
corporations, whether from Singapore or elsewhere, that are
carrying on a business of providing DT services outside Singapore,
as set out in section 137 of the FSM Act. All individuals operating
from a place of business in Singapore who carry on a business of
providing DT services outside Singapore will require a DTSP
licence, unless the individual falls within one of the categories
of persons in section 137(5) of the FSM Act. In determining whether
a DTSP is "carrying on a business of providing DT services
outside Singapore", factors such as whether the DTSP's
front-office functions (e.g., sales, business development) or
customers are located outside Singapore etc., would be
relevant.
Some of the key points are summarized below:
1.Licensing Approach
MAS has confirmed that it will adopt a prudent and
cautious approach to licensing DTSPs, and licences will be granted
only in extremely limited circumstances. MAS will take into
account, among other factors:
- Whether the applicant has a business model that makes economic sense and valid reasons for not providing DT services in Singapore despite being incorporated here.
- Whether the applicant is already regulated and supervised for compliance with relevant internationally agreed standards (e.g., FATF) in the jurisdictions where it provides DT services.
- MAS's assessment of the applicant's business structure and ability to comply with regulatory obligations.
MAS will not provide any transitional arrangements. All DTSPs subject to licensing must suspend or cease business by 30 June 2025 if they do not hold a DTSP licence.
2. Application and Fees
New applicants applying for DTSP licence will need to
submit a legal opinion from a reputable law firm together with
their applications. The legal opinion should include a clear and
concise summary of the applicant's business model and an
assessment of whether the applicant's proposed service(s)
and/or product(s) are regulated digital token services under the
FSM Act.
Further, upon being granted an in-principle approval, an applicant would be required to appoint a qualified independent External Auditor to perform an independent assessment of its policies, procedures and controls in the areas of Technology and Cybersecurity risks.
All licensees would be subject to an annual licence fee of $10,000, regardless of the number of DT services which it provides.
3. Financial Requirements
Licensees are required to maintain a minimum initial and
ongoing financial threshold of SGD 250,000, reflected as the base
capital, total capital contribution, and cash deposit,
respectively, in the case of a company, partnership, limited
liability partnership, or individual. This requirement is intended
to ensure that licensees have a meaningful presence in Singapore
and sufficient resources to conduct their business.
4. Business Conduct and Compliance
MAS will require approval for key personnel, including the
chief executive officer, directors, partners, or managers.
Competency requirements are set out in the 'Guidelines on Licensing for Digital Token service
Providers' which includes sufficient experience in
operating a DTSP business and understanding of the regulatory
framework.
Licensees must have appropriate compliance management arrangements, commensurate with the scale and complexity of their operations. This may be an independent compliance function in Singapore or compliance support from a holding company or overseas related entity, but a suitably qualified compliance officer at the management level is mandatory.
5. Audit and Reporting
A licensee is required to appoint an auditor to conduct an
audit of the transactions in relation to the DT services provided
by the licensee, and submit the audit report to MAS annually. In
addition to audits, licensees must maintain an audit function that
is adequately resourced and independent, and be able to regularly
assess the effectiveness of the licensee's internal policies,
procedures and controls, and its compliance with regulatory
requirements.
6. Technology Risk and Cyber Hygiene
Given the reliance on distributed ledger technology and
exposure to cyber threats, MAS will require licensees to implement
technology risk management and cyber hygiene controls. These
requirements are intended to ensure operational resilience and
safeguard against cyberattacks and system outages.
Practical Implications
The MAS's finalised framework for DTSPs under the FSM Act sets
a high standard for market entry and operation. It reflects
Singapore's ongoing efforts to uphold the integrity and
reputation of its financial system. Market participants should
carefully review their business models, identify any compliance
gaps, and seek legal guidance ahead of the 30 June 2025
deadline.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
