Singapore's MAS Invites Industry Feedback on New Crypto Licensing Framework by 4 November 2024

MAS Seeks Input on Regulatory Measures for Digital Token Service Providers

The Monetary Authority of Singapore (MAS) has opened the floor for industry feedback through a consultation paper aimed at establishing new regulatory measures for digital token service providers (DTSPs).

This initiative falls under the Financial Services and Markets Act (FSM Act), a legislative framework designed to enhance regulatory oversight in the fast-evolving crypto landscape.

The FSM Act was officially passed in Parliament on 5 April 2022 and represents a significant step towards managing the associated risks of digital tokens effectively.

What Does the FSM Act Entail for DTSPs?

Under the FSM Act, DTSPs operating both within and outside Singapore will be required to obtain a licence from the MAS.

This is a move to close the regulatory gaps that currently exist, particularly concerning Singaporean corporations and individuals providing crypto services abroad.

The MAS has made it clear that licensing will not be a standard procedure but will be reserved for exceptional cases.

"Most operators with Singapore touchpoints will likely be covered under the existing crypto regulatory framework," the MAS stated, emphasising the importance of maintaining robust regulatory compliance.

New Compliance Requirements: What Should DTSPs Expect?

DTSPs will be subjected to a variety of conduct requirements, including stringent anti-money laundering (AML) rules, which are vital for maintaining the integrity of the financial system.

Moreover, these providers must demonstrate a substantial presence in Singapore, ensuring that their operations contribute to the local economy and regulatory landscape.

The proposed framework introduces several regulatory instruments under the FSM Act, encompassing AML/CFT (anti-money laundering and counter-financing of terrorism) requirements, technology risk management, cyber hygiene notices, and conduct and disclosure obligations.

This multifaceted approach is designed to address a range of potential risks inherent in the crypto sector.

What Input is the MAS Seeking from Stakeholders?

The MAS is actively encouraging industry participants to engage in the consultation process and shape the final regulations.

Stakeholders are invited to provide feedback on critical areas such as third-party reliance, correspondent account services, and value transfer requirements.

This open dialogue reflects the MAS's commitment to creating a regulatory environment that is both effective and adaptable to the evolving needs of the digital economy.

The authority is keen to hear diverse perspectives from financial industry participants and other interested parties until 4 November 2024.

What Comes Next for DTSPs?

Following the consultation period, the MAS intends to publish the final regulations and guidelines at least four weeks before they become effective.

This timeline provides stakeholders with a clear expectation of when the new regulatory measures will be implemented, allowing them to prepare adequately for compliance.

The MAS's proactive approach highlights its dedication to fostering a transparent and accountable framework for DTSPs while safeguarding the financial ecosystem in Singapore.

This evolving regulatory landscape will play a crucial role in shaping how digital tokens are managed and transacted, ensuring that Singapore remains a competitive hub for cryptocurrency activities while maintaining high standards of regulatory compliance.