Source: AiYing Compliance
Singapore’s regulation of virtual assets is primarily based on the Monetary Authority of Singapore’s (MAS) “A Guide to Digital Token Offerings” released in May 2020. This guide represents Singapore’s main regulatory approach to Web3 and clarifies that security tokens and digital payment tokens are regulated by two specific laws, while the regulatory requirements for utility tokens are not explicitly stated. Specifically, digital payment tokens are regulated under the Payment Services Act (PSA) mentioned earlier, which came into effect in January 2020 and is responsible for regulating Singapore’s payment services industry. If virtual assets fall under the definition of securities, derivatives contracts, or collective investment schemes (CIS) as outlined in the Securities and Futures Act (SFA), they are considered capital markets products and are subject to regulation under the SFA unless exempted.
Singapore’s Capital Markets Regulation for Virtual Assets
1. Determining whether virtual assets fall under capital markets products:
According to MAS’s “A Guide to Digital Token Offerings,” MAS examines the structure, characteristics, and associated rights of digital tokens to determine if they fall under capital markets products. Specifically, digital tokens may be classified as the following capital markets products:
2. Capital markets products services:
In addition, the establishment or operation of exchanges for capital markets products requires approval or confirmation from MAS. Only exchanges approved by MAS or entities with confirmed status are eligible to establish or operate exchanges.
3. Capital markets products offerings (exemptions):
If virtual assets are classified as capital markets products, their offerings must comply with a series of regulations, including meeting the requirements of a registered prospectus with the MAS unless exempted under specific circumstances. These exemptions include:
It is important to note that the fulfillment of the above exemptions also requires meeting other conditions, primarily including restrictions on advertising and the prohibition of sales or promotional fees. There have been cases where initial coin offerings (ICOs) of security tokens were prohibited by MAS because the issuers intended to achieve exemption by issuing to accredited investors, but their legal advisors shared information related to the offering on social media, violating the prohibition on advertising.
If the virtual assets being offered belong to collective investment schemes (CIS), the corresponding CIS also needs to be authorized or confirmed by MAS and comply with relevant compliance requirements.
Important reminder: If virtual assets are classified as capital markets products, they will be subject to regulation under capital markets laws. Engaging in services related to these virtual assets may require obtaining specific licenses. Additionally, the issuance of these virtual assets must comply with the registered prospectus requirements set by the Monetary Authority of Singapore (MAS) unless exempted.
Types of Capital Markets Licenses in Singapore
Singapore’s financial industry practices mixed business operations and unified license management. The Monetary Authority of Singapore (MAS), established in 1971, is the core of the financial regulatory system. It serves the dual role of central bank regulation and supervision of the banking, securities, insurance, and other financial industries. MAS is also responsible for overall financial industry access and financial institution registration. MAS issues various types of licenses, with the main types of capital markets licenses being the following nine categories:
Capital Market Services License (CMS) in Singapore
Among them, the fund management license, also known as the Capital Market Services License (CMS license), is required for conducting fund management activities in Singapore. This can be obtained either by already holding the CMS fund management license as a licensed fund management company (LFMC) or by applying to MAS to register as a registered fund management company (RFMC). However, on October 24, 2023, MAS published a public consultation seeking public opinions on the transition arrangement for existing RFMCs. MAS plans to abolish the existing RFMC regime, with the operating RFMCs becoming licensed fund management companies (LFMCs) after submitting an application and being approved, subject to LFMC regulatory requirements.
The Capital Markets Services Licensee (CMS) is a financial regulatory license issued by the Monetary Authority of Singapore (MAS). CMS licensees are authorized to conduct seven types of businesses after approval, including:
Applicants can choose one or multiple businesses to operate but must meet the corresponding regulatory requirements. Obtaining a CMS license allows engaging in fund management regulated by the Monetary Authority of Singapore. Moreover, it is recognized by the local regulatory authorities in terms of qualifications and risk management, providing investors with more comprehensive wealth management services.
Licensed Fund Management Company (LFMC)
A Licensed Fund Management Company (LFMC) refers to a fund management company that has obtained the CMS license.
LFMCs can be further classified as:
(a) Retail Licensed Fund Management Company (RETAIL LFMC),
(b) Accredited/Institutional Licensed Fund Management Company (A/I LFMC), and
(c) Venture Capital Licensed Fund Management Company (VC LFMC).
Currently, companies such as HashKey Capital, DigiFT, FOMO Pay, SBI Digital Markets (a subsidiary of Japanese financial services giant SBI Holdings), Hex Trust (a crypto custodian), and Sygnum Singapore (the Singapore branch of Swiss digital asset bank Sygnum) have all obtained CMS licenses issued by MAS. They are authorized to provide securities, futures, and security token trading services to institutions and accredited investors in Singapore.
