The Monetary Authority of Singapore is about to implement a regulatory framework for digital token service providers.

June 30, 2025 is approaching, and Singapore's Financial Services and Markets Act (FSMA) will officially come into effect. This regulation will establish strict rules for the digital asset industry, aiming to uphold Singapore's reputation as a global financial center.

The FSMA primarily targets Digital Token Services (DTS), which include trading, transferring, exchanging, custody, and consulting services for digital tokens. Since these services often involve online cross-border operations, they are susceptible to being exploited by criminals for money laundering or financing terrorism activities.

A Digital Token Service Provider (DTSP) refers to individuals or businesses that have an office or registered company in Singapore but primarily provide digital token services overseas. Although these services have little connection to Singapore locally, they could affect Singapore's reputation if issues arise. Therefore, the Monetary Authority of Singapore has decided to implement strict regulations, requiring DTSPs to obtain a license and comply with high standards of compliance.

In response to industry concerns, the Monetary Authority of Singapore provided a detailed reply to corporate feedback on June 6. The following is a summary of the reply content:

1. License application requirements: Even if the company is registered only for tax residency or only has senior executives, as long as it actually provides overseas DT services, a license must still be applied for.

2. Definition of business premises: Home office may be considered a business premises, the key is whether substantial business activities are conducted.

3. License application thresholds and time: The application threshold is high, and the financial management bureau only issues licenses in very few cases. Starting from June 30, 2025, unlicensed DTSPs must cease overseas services.

4. License fees and capital requirements: The application fee and annual fee for the license are both 10,000 SGD, and the company must prepare a capital of 250,000 SGD.

5. License application target: Companies that have a business location or are registered in Singapore must apply for a license if they provide overseas digital Token services.

6. Customer Due Diligence (CDD): After obtaining the license, existing customers need to undergo a re-evaluation of CDD. The completion time will be determined based on the level of customer risk.

7. Third-party CDD: Allows the use of third parties for CDD, but excludes payment service companies. Companies must assess the reliability of third parties on their own.

8. Account services and transfer regulations: Enterprises must evaluate the anti-money laundering measures of the cooperating financial institutions, and must provide complete information of the initiator and beneficiary during transfers.

9. Technical risks and cybersecurity requirements: IT systems must be stable and reliable, customer data must not be leaked, and major incidents must be reported within 1 hour.

10. Behavior and Disclosure Requirements: Enterprises must record transactions, issue receipts, publicize exchange rates and fees, establish fixed business hours, and publish risk warnings.

11. Compliance Guidelines: DTSP must adhere to general financial guidelines, and the financial regulatory authority may issue DTSP-specific FAQs in the future.

12. Higher compliance requirements: Even if licensed or exempted, the FSMA imposes stricter requirements on all DTSP-related businesses, including technical risk management, submission of annual audit reports, anti-money laundering, and counter-terrorism financing requirements.

For businesses, it is advisable to conduct an immediate self-assessment to confirm whether a license application is necessary and to prepare for compliance. At the same time, closely monitor the subsequent guidance and frequently asked questions from the financial management bureau, and actively communicate with regulatory agencies to ensure a smooth transition to the new regulatory framework.