Regulatory framework for digital token service providers under Financial Services and Markets Act 2022 in operation on 30 June 2025: Allen & Gledhill

10 June 2025

The framework to regulate digital token service providers (“DTSPs”) under Part 9 of the Financial Services and Markets Act 2022 (“FSMA”) will come into operation on 30 June 2025. The Monetary Authority of Singapore (“MAS”) will not be providing a transitional arrangement for DTSPs.

Existing DTSPs providing services only to customers outside of Singapore relating to digital payment tokens and tokens of capital market products will be required to cease these activities when the regime comes into effect on 30 June 2025.

Regulation and licensing of digital token service providers

The FSMA will introduce licensing requirements and general powers over DTSPs, including powers for MAS to conduct anti-money laundering and countering the financing of terrorism (“AML/CFT”) inspections, and render assistance to domestic authorities and MAS’ foreign AML/CFT supervisory counterparts.

Among other things, Part 9 of the FSMA provides for the licensing requirement (“licensing requirement”) for (i) individuals and partnerships who, from a place of business in Singapore, carry on a business of providing any type of digital token service (“DTS”) outside Singapore; and (ii) Singapore corporations that carry on a business, whether from Singapore or elsewhere, of providing any type of DTS outside of Singapore (collectively, DTSPs).

The licensing requirement does not apply to a person who carries on a business of providing a DTS that is required to be licensed under the Securities and Futures Act 2001 (“SFA”), Financial Advisers Act 2001 (“FAA”), or Payment Services Act 2019 (“PSA”), or that is exempted therefrom. The licensing requirement also does not apply to a person who carries on a business of providing a DTS that is specified in the Second Schedule to the FSMA.

Digital tokens refer to (i) digital payment tokens; or (ii) digital representations of capital markets products which can be transferred, stored, or traded electronically and which satisfy such other characteristics as MAS may prescribe.

The First Schedule to the FSMA lists the services that constitute DTS and those that do not.

DTSPs providing services solely to customers outside of Singapore to cease activity

On 6 June 2025, MAS issued a media release clarifying the scope for its DTSPs regime.

Scope of new regulation

From 30 June 2025, DTSPs providing services solely to customers outside of Singapore relating to digital payment tokens and tokens of capital market products will need to be licensed. MAS has set the bar high for licensing and will generally not issue a licence. The money laundering risks are higher in such business models and MAS is unable to effectively supervise such persons if their substantive regulated activity is outside of Singapore. Without a licence, such DTSPs will have to cease their regulated activities.

Providers of services for digital payment tokens or tokens of capital market products that serve customers in Singapore are already subject to regulation under the SFA, FAA, or PSA, and there is no change to what the licensed providers can do. Such providers which serve customers in Singapore may also provide services to customers outside of Singapore.

Providers of services in relation to other tokens, such as those only used as utility and governance tokens, are not subject to licensing or regulation under the new regime and hence are not impacted.

Transition period

Due to the higher risks presented by the specific circumstances set out above, existing DTSPs serving only customers outside of Singapore will be required to cease this activity when the regime comes into effect on 30 June 2025. As mentioned above, MAS will not be providing a transitional arrangement for DTSPs.

Response to feedback on MAS consultation on regulations, notices, and guidelines

To support the implementation of Part 9 of the FSMA, various regulatory instruments such as the Financial Services and Markets (Digital Token Service Providers) Regulations 2025, MAS Notices (including on AML/CFT), and MAS Guidelines have been issued and will come into operation on 30 June 2025.

MAS conducted a public consultation on draft versions of the regulations, MAS Notices, and MAS Guidelines which closed on 4 November 2024. On 30 May 2025, MAS published its response to the feedback received on the consultation.

Implementation of FSMA in phases