Singapore will introduce fines for local crypto firms for providing services overseas

What’s new? The Monetary Authority of Singapore (MAS), which has the functions of central bank and financial regulator, has issued a directive on local cryptocurrency service providers. According to the document, Singaporean crypto firms are prohibited from providing digital token (DT) related services in overseas markets.

Press release

What else is known? The directive is adopted by MAS in response to industry feedback on the proposed regulatory framework for digital token service providers (DSTPs) under the Financial Services and Markets Act of 2022 (FSM Act).

The document does not envisage any transitional arrangements for local DTSPs providing services overseas. Any Singapore-registered companies, individuals, or partnerships providing DT services outside the city-state must either cease operations or obtain a license when the DTSP provisions come into effect.

“DTSPs which are subject to a licensing requirement under section 137 of the FSM Act must suspend or cease carrying on a business of providing DT services outside Singapore by 30 June 2025,” MAS wrote.

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Under section 137 of the FSM Act, Singapore-based companies are subject to licensing. This includes companies whose overseas operations with DT are not their primary business.

Violations carry fines of up to $250 000 Singaporean dollars ($200 000) and jail terms of up to three years.

MAS clarified that only firms licensed or exempted under existing financial laws, the Securities and Futures Act, the Financial Advisers Act, or the Payment Services Act, can continue to operate without breaching the new rules.

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While DTSPs can obtain a license to continue overseas operations, lawyers say it will be difficult to do so. For example, Hagen Rooke, a partner at Gibson, Dunn & Crutcher, wrote on his LinkedIn profile that licenses will only be granted in rare cases because of increased regulatory concerns over anti-money laundering (AML).

The lawyer urged the companies to consider taking quick action to mitigate risks by restructuring to eliminate touch points with Singapore.

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DTSP’s obligation to cease overseas operations stems from regulatory changes to address risks in the digital asset sector.

Singapore adopted the FSM Act in April 2022, this law gave MAS greater powers to regulate crypto firms operating outside the country but based in Singapore.

It requires DTSPs with overseas operations to comply with AML standards, even if they do not offer services in Singapore.

MAS expressed concern that crypto firms could take advantage of regulatory gaps by registering in Singapore while conducting unregulated activities overseas.