On 4 October 2024, the Monetary Authority of Singapore (“MAS”) issued a consultation paper on the proposed regulatory approach, regulations, notices and guidelines for digital token service providers issued under the Financial Services and Markets Act 2022 (“FSM Act”) (the “consultation paper”).
The consultation period closed on 4 November 2024, and MAS would like to thank all respondents for their contributions. MAS has considered carefully the feedback received and incorporated them where justified and appropriate. Comments that are of a wider interest, together with MAS’ responses, are set out below.
MAS’ Response
Control of Provision of Digital Token Services
MAS would like to reiterate that a DTSP licence will only be granted under extremely limited circumstances. Hence, MAS maintains our position that no transitional period will be provided. Instead, MAS will provide the four-week commencement notification period for DTSPs to suspend or cease the provision of all DT services by 30 June 2025.
In relation to DTSP licence fees, the proposed DTSP licence fees are structured similarly to the licence application fees and annual licence fees applied to payment service providers who provide digital payment token services (“DPTSPs”), where the fees are fixed regardless of the size and scope of the DPTSP’s business operations. In particular, all licensees would be subject to an annual licence fee of $10,000, regardless of the number of DT services which it provides. In this regard, MAS has maintained the proposed DTSP licence fees.
Financial requirements
As set out in the consultation paper, one of the key objectives of the minimum initial and ongoing financial requirements is for licensees to demonstrate their commitment to maintain a meaningful presence in Singapore. Therefore, MAS will maintain the minimum initial and ongoing financial requirements of $250,000 in base capital, total capital contribution and cash deposit in the case of a company, partnership or limited liability partnership and individual respectively.
Financial Services and Markets Notices: Overview
As set out in section 137(1) of the FSM Act, all individuals who from a place of business in Singapore 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 this regard, an individual attracts a licensing requirement under section 137(1) of the FSM Act if he or she is located in Singapore and is carrying on a business of providing DT services to persons (i.e. individuals and non-individuals) outside of Singapore. However, where an individual is an employee of a foreign incorporated company that provides DT services outside Singapore, work done by the individual as part of his or her employment with the foreign-incorporated company would not, in itself, attract a licensing requirement under section 137(1) of the FSM Act.
Regarding requirements placed on individuals, given that DT services provided by DTSPs are of higher ML/TF risks and exposes Singapore to potential reputational risk as DTSPs are operating from a place of business in Singapore or formed or incorporated in Singapore but carry on a business of DT services outside of Singapore, MAS will require all DTSPs, whether they are individuals or nonindividuals, to obtain a DTSP licence unless the DTSP falls within one of the categories in section 137(5) of the FSM Act.
Reliance on Third Parties
As set out in the consultation paper, due to the uneven level of AML/CFT controls across the payment sector in Singapore and globally, MAS maintains our position of excluding licensed payment service providers and financial institutions holding an equivalent licence and supervised by a foreign authority for compliance with AML/CFT requirements, from the definition of “third party” in the FSM-N27 Notice that licensees can rely on to perform CDD measures.
Reporting requirements
In relation to the scope of reportable activities and incidents required under the FSM-N28 Notice, MAS does not intend to prescribe the materiality of a suspicious activity or incident of fraud. This would depend on various factors such as the amounts involved, the impact on the business operations, etc., which should be assessed by the licensee.
Regarding the proposed reporting timeline under the FSM-N28 Notice, licensees must submit a report on suspicious activities and incidents of fraud to the Authority within five working days upon the discovery of the activity or incident, if such activities or incidents are material to the safety, soundness or reputation of the licensee. If the licensee is still in the midst of investigation, the licensee should indicate the status of the investigation in the report and MAS may reach out to the licensee for more information.
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