The Singapore Financial Services and Markets Act is about to come into effect, and the digital asset industry is facing strict regulation.

With the approach of June 30, 2025, the Financial Services and Markets Act (FSMA) of Singapore is set to be officially implemented, establishing strict regulations for the digital asset industry. The Monetary Authority of Singapore (MAS) aims to uphold the country's reputation as a global financial center by imposing stringent regulations on digital token service providers (DTSP).

The FSMA covers services such as the trading, transfer, exchange, custody, and consulting of digital tokens. Since these services are typically conducted online across borders, they are vulnerable to exploitation by criminals for money laundering or financing terrorist activities. DTSP refers to individuals or enterprises that have an office or registered company in Singapore but primarily provide digital token services overseas. Although these services have little local connection to Singapore, any issues that arise could harm Singapore's reputation. As a result, the MAS has decided to implement strict regulations, requiring DTSPs to obtain a license and comply with high standards of compliance.

Recently, MAS provided a detailed response to industry feedback, addressing many key issues:

1. License application requirements: MAS states that DTSP licenses are issued only in very rare cases. Applicants must have a reasonable business model, comply with international regulatory standards, and have no issues with the company structure. Importantly, from June 30, 2025, unlicensed DTSPs must cease overseas services, or they will be in violation of the law.

2. License fees and capital requirements: The application fee and annual fee for the license are both 10,000 Singapore dollars, fixed and unchanged. In addition, applicants must prepare a capital of 250,000 Singapore dollars to demonstrate the ability to develop long-term in Singapore.

3. Customer Due Diligence (CDD): After obtaining the license, the DTSP must re-conduct CDD for existing customers, including identity verification and source of funds investigation. The completion time will be determined by MAS based on the level of customer risk.

4. Technical Risks and Cybersecurity: DTSP must ensure the stability of IT systems, protect customer data, and report to MAS within 1 hour after significant incidents occur. In addition, various cybersecurity measures should be implemented, such as account protection, system patch updates, the use of firewalls and antivirus software, and multi-factor authentication.

5. Conduct and Disclosure Requirements: DTSP must record transactions, issue receipts, publicly display exchange rates and fees, and set fixed business hours for customer contact. Additionally, it must issue risk warnings to alert customers to potential loss risks.

6. Compliance Guidelines: MAS will provide general financial guidance for DTSP, covering appropriate candidates, technological risks, business continuity, and outsourcing, among other aspects. A dedicated FAQ for DTSP may be published in the future.

For institutions that have obtained other relevant licenses or exemptions, the FSMA still imposes higher compliance requirements, including stricter technical risk management, submission of annual audit reports, higher anti-money laundering and counter-terrorist financing (AML/CFT) requirements, and rapid reporting of significant security incidents.

In light of the upcoming implementation of the FSMA, industry insiders recommend that companies take action immediately:

1. Conduct a self-check to confirm whether the business needs to apply for a license, and prepare the application or formulate an exit plan in a timely manner.
2. Invest funds to upgrade the system, train employees, and ensure compliance with CDD, technical security, and information disclosure requirements.
3. Proactively communicate with MAS to clarify the timeline and specific requirements.
4. Closely follow the guidelines and FAQs released by MAS thereafter.

The implementation of the FSMA in Singapore will have a profound impact on the digital asset industry. Companies need to carefully assess their own situations and develop appropriate response strategies to achieve compliance and sustainable development in the new regulatory environment.