Singapore’s financial authority has established a cutoff of June 30 for local cryptocurrency service providers to discontinue offering digital token (DT) services to international markets.
This instruction originated from the Monetary Authority of Singapore’s (MAS) reply to industry input regarding its suggested regulatory framework for Digital Token Service Providers (DSTPs) under the Financial Services and Markets Act of 2022 (FSM Act).
MAS announced that no transitional arrangements would be established for local DTSPs delivering services internationally. It indicated that any company, individual, or partnership registered in Singapore that provides DT services abroad must either halt operations or acquire a license when the DTSP provisions become effective by the end of June.
“DTSPs that fall under a licensing obligation according to section 137 of the FSM Act must pause or cease the business of providing DT services outside of Singapore by 30 June 2025,” MAS noted.
Offenders could incur fines of nearly $200,000
According to Section 137 of the FSM Act, businesses based in Singapore are deemed to be operating from Singapore and thus must adhere to licensing protocols. This encompasses companies whose foreign token-related activities are not their main business function.
Entities found in breach of the regulations will be liable to substantial fines of up to 250,000 Singapore dollars ($200,000) and imprisonment for as long as three years.
MAS indicated that only firms licensed or exempted under existing financial regulations — the Securities and Futures Act, Financial Advisers Act, or Payment Services Act — may continue to function without conflicting with the new legislation.
Even with the possibility of obtaining a license, a lawyer indicated that such scenarios would be rare. In a LinkedIn post, Hagen Rooke, a Partner at Gibson, Dunn & Crutcher, mentioned that licenses would be granted only in exceptional circumstances, due to increased regulatory scrutiny surrounding Counter-Terrorist Financing (CFT) and Anti-Money Laundering (AML).
“The MAS will issue licenses under the new regimen only under very restricted situations (as this operational model typically raises regulatory issues, e.g. AML/CFT-related),” Rooke commented.
The attorney advised companies to take immediate action to mitigate risks through operational restructuring to eliminate their Singapore connections.
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Singapore confronts cross-border threats
The action signifies a significant intensification of regulatory supervision over cryptocurrency activities by Singapore’s officials. The requirement for DTSPs to halt international functions is a result of regulatory advancements aimed at tackling risks within the digital asset landscape.
In April 2022, Singapore enacted the FSM bill, bestowing MAS with augmented authority to oversee cryptocurrency entities that operate outside of the nation but are registered in Singapore.
The regulation necessitates that DTSPs with international operations adhere to AML and CFT standards, even if they do not provide services within Singapore. MAS expressed worries that cryptocurrency companies could take advantage of regulatory loopholes by registering in Singapore while executing unregulated functions overseas.
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