Assessing the Scope of Part 9 of the Financial Services and Markets Act 2022 for Digital Token Service Providers

We have been obtaining queries from crypto firms on the applicability of the implementation of Part 9 of the Financial Services and Markets Act 2022 (“FSMA”) that may relate to them. There has been confusion and concerns in the industry on this. With this in mind, we set out guidance on Part 9 of the FSMA, effective 30 June 2025. This introduces a licensing regime for digital token service providers (“DTSP”) in Singapore. This regime targets entities providing digital token (“DT”) services, including cryptocurrencies, from Singapore to customers outside Singapore. Given the Monetary Authority of Singapore’s (“MAS”) restrictive licensing approach, we advise crypto firms to carefully assess whether they fall within the scope of Part 9. 

In this alert, we outline when a DTSP is in scope, provide steps to evaluate your status, and compare the FSMA’s scope with Singapore’s Payment Services Act 2019 (“PS Act”) and Vietnam’s Law on Digital Technology Industry to contextualise your compliance obligations. 

When is a digital token service provider in scope under Part 9 of the FSMA?

We are of the view that a DTSP falls within the scope of Part 9 of the FSMA if it meets the following criteria:

1. Entity type and location:
   • Singapore-incorporated companies or limited liability partnerships (regardless of where services are provided from).
   • Individuals or partnerships operating from a place of business in Singapore (e.g., a physical office or significant operational presence). 
     • However, MAS has most recently clarified that 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.
        
2. Service provision:
   • The entity provides DT services solely to customers outside Singapore, determined by factors such as:
     • Location of customers (overseas clients).
     • Location of front-office functions (e.g., sales, business development conducted outside Singapore). 
   • In our view, services provided to Singapore-based customers typically fall under other regimes, such as the PS Act or Securities and Futures Act 2001 (“SFA”).
      
3. Nature of digital tokens:
   • The services involve DTs, defined as:
     • Digital payment tokens (“DPT”s), such as cryptocurrencies (e.g., Bitcoin, Ether, Litecoin) or single-currency stablecoins (e.g., USDC, USDT).
     • Digital representation of a capital markets product i.e. tokenised capital markets products, such as tokenised equities, debentures, or fund units that can be transferred, stored, or traded electronically.
   • MAS has restated that utility tokens and governance tokens are excluded.
      
4. Regulated activities:
   • The activities must constitute regulated DT services under Part 9, including, generally:
     • Buying or selling DTs in exchange for any money or other DTs
     • Operating a DT exchange
     • Arranging DT transmissions between accounts
     • Inducing agreements to buy/sell DTs
     • Providing custody or safeguarding of DTs where the provider controls the DTs
     • Advising on DTs (directly or via publications)
   • We highlight that purely technical services (e.g., data processing, IT security, network maintenance) not involving possession of money or DTs are excluded.
      
5. Non-exempt status:
   • Entities already licensed or exempt under the PS Act, SFA, or Financial Advisers Act 2001 for the same activities are generally exempt from FSMA licensing e.g. a PS Act-licensed DPT exchange serving overseas clients does not need an FSMA licence for those activities.

Comparison of regulatory scope with other regimes

For the purposes of international comparison, we have also prepared the following table to compare the scope of Singapore’s Part 9 of FSMA, PS Act, and Vietnam’s Law on Digital Technology Industry. This also clarifies when crypto firms fall under each regime:

The comparison table underscores Singapore’s targeted crypto regulation versus Vietnam’s emerging framework, which awaits further clarification.

Steps to assess if you are in scope of the FSMA

We recommend the following steps to determine whether your operations fall within Part 9 of the FSMA:

1. Identify your entity structure:
   • Confirm whether your business is a Singapore-incorporated company or limited liability partnership, or if you are an individual or partnership with a place of business in Singapore (e.g., any location (including a kiosk that can be moved from one location to another) in Singapore used for carrying on business).
   • We advise reviewing your corporate registration and operational presence to clarify your status.
      
2. Evaluate customer location and service delivery:
   • Assess whether your DT services are provided to customers outside Singapore. Review client contracts, marketing materials, and front-office activities (e.g., sales teams’ locations).
   • We recommend documenting customer jurisdictions and operational workflows to confirm extraterritorial service provision.
      
3. Classify your tokens:
   • Analyse the tokens you handle to determine if they are DPTs or tokenised capital markets products e.g., check if tokens like stablecoins or tokenised equities are involved.
      
4. Review your activities:
   • Map your services against FSMA’s regulated activities (e.g., DPT trading, custody, advisory). 
   • We advise creating a service inventory to identify which activities, if any, trigger FSMA requirements.
      
5. Assess for applicable exemptions:
   • Verify if you hold a licence or exemption under the PS Act, SFA, or FAA for the same activities. For example, a PS Act major payment institution licence for DPT services may exempt you from FSMA licensing.
   • We recommend reviewing your existing licences and consulting MAS guidelines to confirm exemption eligibility.
      
6. Assess for applicable exclusions:
   • Determine if your services are purely technical (e.g., IT security, data storage) and do not involve possessing money or DTs. If so, you may qualify for the technical service provider exemption.
   • We advise documenting your operational model to substantiate exclusion claims.
      
7. Engage with MAS and legal experts:
   • If uncertain about your scope status, we recommend seeking clarification from MAS or engaging legal counsel to assess your operations against FSMA criteria.

Implications of being in scope

If you are in scope, we advise preparing for the following:

• Licensing: Apply for a DTSP licence. However, we note MAS’ restrictive approach where MAS has stated repeatedly that a “DTSP licence will only be granted under extremely limited circumstances”. To apply for a DTSP licence, requirements include S$250,000 base capital, an S$10,000 annual licence fee, a Singapore-based compliance officer, and to conduct penetration testing.
• Compliance: Implement stringent AML/CFT measures (e.g., customer due diligence, transaction monitoring), technology risk management and annual audits.
• Cessation: If unlicensed, cease DT services to overseas clients by the effective date of 30 June 2025 to avoid penalties, including fines or imprisonment.

Assistance we can provide

We are of the view that Part 9 of the FSMA, effective 30 June 2025, applies to DTSPs providing services to overseas clients from Singapore, with a narrow scope but significant compliance obligations. 

We have called on our deep bench of financial services’ regulatory expertise and our experience to establish a team capable of delivering complete, accurate, and commercial advice in relation to assisting our clients to be compliant with MAS’ latest requirements. Should you require any assistance on the FSMA or PS Act, do contact our team for tailored guidance to navigate the Singapore regimes.

This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute legal advice and is intended to provide general information only. Information in this article is accurate as of 23 June 2025. 

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