MAS Guidelines on Licensing for Digital Token Service Providers (DTSPs)

The Monetary Authority of Singapore (MAS) has released comprehensive guidelines for licensing Digital Token Service Providers (DTSPs) under the Financial Services and Markets Act 2022 (FSM Act).

These guidelines outline the licensing framework, eligibility criteria, application procedures, and ongoing compliance obligations for entities involved in digital token services.

1. Purpose

These guidelines aim to assist entities in understanding the licensing process, regulatory standards, and continuous obligations under Part 9 of the FSM Act.

They should be read in conjunction with the FSM Act, the Financial Services and Markets (Digital Token Service Providers) Regulations (FSM Regulations), and other relevant MAS-issued documents.

2. Licensing Requirements

2.1 Mandatory Licensing

Under Section 137 of the FSM Act, any person or entity conducting digital token services in Singapore must obtain a DTSP license unless exempted.

This includes entities incorporated in Singapore but operating digital token services overseas.

2.2 No Transitional Arrangements

• MAS has stipulated that there will be no transitional arrangements.
• Entities must cease overseas digital token services by
• June 30, 2025
• unless they have secured a DTSP license.

Non-compliance may result in penalties, including fines up to SGD 250,000 and/or imprisonment for up to three years.

2.3 Scope of Regulated Services

The FSM Act's First Schedule outlines ten categories of regulated digital token services, including:

• Digital token trading services.
• Services facilitating the exchange of digital tokens.
• Receiving digital tokens for transfer purposes.
• Arranging transfers of digital tokens.
• Inducing or attempting to induce transactions involving digital tokens
• Custody services for digital tokens.
• Executing instructions related to digital tokens.
• Custody services for digital token instruments.
• Executing instructions related to digital token instruments.
• Advisory services related to digital tokens.

3. Eligibility Criteria

Given the inherent risks associated with digital token services, such as money laundering and terrorist financing, MAS adopts a cautious approach to licensing.Licenses will be granted under exceptional circumstances

• The applicant demonstrates a sound business model with legitimate reasons for not conducting digital token services within Singapore.
• The applicant is subject to regulation and supervision in all jurisdictions where it operates, adhering to international standards set by bodies like the Financial Action Task Force (FATF).
• MAS has no concerns regarding the applicant's business structure and compliance capabilities.

Applicants must also meet the following requirements:

• Governance and Ownership: Comply with structures outlined in Appendix 1 and be registered with the Accounting and Corporate Regulatory Authority (ACRA).
• Fit and Proper Criteria: Key individuals must meet standards of honesty, integrity, competence, and financial soundness as per MAS's Guidelines on Fit and Proper Criteria [FSG-G01].
• Key Personnel Competence: Senior management should possess relevant experience in digital token services and a thorough understanding of Singapore's regulatory framework.
• Physical Presence: Maintain a permanent place of business or registered office in Singapore, with at least one staff member available to handle inquiries.
• Capital Requirements: Maintain a minimum base capital of SGD 250,000, with adequate buffers to cover 6–12 months of operational expenses.
• Compliance Arrangements: Implement effective compliance programs proportional to the business's nature and complexity, as detailed in Appendix
• Technology Risk Management: Conduct penetration testing, address high-risk issues, and have measures independently verified before license issuance.
• Audit Requirements: Establish independent audit arrangements to assess compliance and operational effectiveness regularly.
• Annual Audit: Appoint an auditor annually to review accounts and compliance with regulatory requirements.
• Undertakings: Provide letters of responsibility or undertakings from parent or affiliated companies if required by MAS.

4. Application Process

4.1 Submission Requirements

Applicants must submit

Form 1 along with the prescribed fees as per the FSM Regulations.

Detailed information required for the application is outlined in Appendix 3.

4.2 Legal Opinion

A legal opinion from a reputable law firm must accompany the application, assessing whether the proposed services fall within the scope of regulated digital token services under the FSM Act.

4.3 Independent Assessment

Upon receiving an In-Principle Approval (IPA), applicants must engage an independent external auditor to assess their technology and cybersecurity risk frameworks, as specified in Appendix 6.

5. Ongoing Obligations for Licensees

Licensed DTSPs are required to:

• AML/CFT Compliance: Adhere to anti-money laundering and counter-terrorism financing regulations, including the FSM Regulations, Terrorism (Suppression of Financing) Act 2002, and relevant MAS notices such as FSM-N27 and FSM-N28.
• Regulatory Reporting: Submit periodic reports on digital token activities as mandated by FSM-N29.
• Cybersecurity Measures: Comply with cybersecurity requirements outlined in FSM-N31, ensuring robust protection of customer information.
• Technology Risk Management: Follow guidelines in FSM-N30 and the Technology Risk Management Guidelines to manage technology-related risks effectively.
• Business Conduct: Maintain high standards of business conduct as per FSM-N32, including transparent disclosures, accurate transaction records, and adherence to prohibited activities.
• Disclosure and Communication: Provide clear information about licensing status and promptly update customers on significant changes, in line with FSM-N33.
• Annual Audit: Ensure annual audits are conducted, with auditors submitting reports using Form 3 to MAS.