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Are Singapore virtual currency exchanges regulated by the Futures & Securities Act?

August 9, 2019

The Monetary Authority of Singapore (MAS) issued a statement clarifying that the offer or issue of digital tokens in Singapore will be regulated by the MAS, if the digital tokens fall within the definition of “securities” regulated under the security laws. MAS’s position is not to regulate virtual currencies. MAS has observed that the function of digital tokens has evolved beyond just being a virtual currency.

Following the August statement, the Deputy Prime Minister of MAS clarified that the end goal was to soundly regulate cryptocurrencies and ICOs. Although MAS does not regulate virtual currencies as such, it regulates activities involving the use of virtual currencies that fall under MAS’s regulatory sphere, such as money laundering and terrorism financing.

MAS is also working on a new regulatory framework for payments that will address the risks associated with virtual currencies, the DPM said. With respect to ICOs, the MAS has not issued specific legislation, but will continue to monitor developments and consider more targeted legislation in future.

Regarding the new payment regulatory framework, the MAS issued a consultation paper proposing the Payment Services Bill in November 2017. The proposed Bill would expand the scope of regulated payment activities to include virtual currency services and other innovations. Under the new framework, entities carrying out virtual currency services including buying or selling virtual currency would be required to be licensed.

Following an increase in the number of ICOs in Singapore, the Monetary Authority of Singapore (MAS) issued a media release on the regulation of digital token offerings[8]. In November 2017, MAS issued a guide to the application of Singapore securities laws to offers or issues of digital tokens. It noted that offers or issues of digital tokens in Singapore may be regulated by the MAS if the digital token is a type of capital markets product under the Securities and Futures Act (Cap. 289). Capital markets products including:

  • Securities or Futures contracts.
  • Contracts or arrangements for the purposes of foreign exchange (FOREX) trading.
    Leveraged foreign exchange trading.

If the company is classified in the above, they are required to identify customers (KYC) and report any suspicious transactions duly. MAS has later reiterated that position, however noted that it regards virtual currencies as those used as “a medium of exchange, a unit of account or a store of value” examples of which include Bitcoin, Litecoin and Ether. MAS has however noted that the function of some digital tokens has developed beyond being solely a virtual currency and their November statement makes clear that digital tokens may also constitute:

  • Shares where they represent ownership in a corporation, liability of the token holder in the corporation and mutual covenants with other token holders in the corporation inter se;
  • A debenture, where they constitute or evidence the indebtedness of the issuer of the digital token in respect of money lent to the issuer by a token holder; or
  • Units in a collective investment scheme (CIS) where they represent a right or interest in a CIS, or an option to acquire such a right or interest.

Where digital tokens constitute securities or units in a CIS, they must be offered in compliance with the prospectus requirements of the SFA and an offer in relation to units in a CIS may be subject to authorisation and recognition requirements.

A person operating a platform in Singapore on which primary offers or issues of digital tokens are made may need to be licensed for one or more regulated activities under the SFA (unless exempt). Persons providing financial advice in Singapore in relation to any digital token that is an investment product must be authorised under the Financial Advisers Act (Cap. 110).

Crypto Exchanges & Escrow

A person who establishes or operates a trading platform for digital tokens which constitute securities or futures contracts in Singapore, will likely be establishing or operating a market which requires approval by MAS as an approved exchange or recognition by MAS as a recognised market operator under the SFA, unless exempt.

On May 24th 2018, MAS warned eight digital token exchanges in Singapore not to facilitate trading in digital tokens that are securities or futures contracts without MAS’ authorisation. It also warned an ICO issuer to stop the offering of its digital tokens in Singapore.

MAS is currently consulting on new regulation which will regulate both e-money (denominated in fiat currency) and virtual currencies. The projected definitions are as follows:

“E-money” is defined as being electronically stored monetary value that represents a claim in advance for the purpose of making payment transactions through the use of a payment account and is accepted by another, separate individual than the e-money issuer.

“Virtual currencies” will be defined as any digital representation of value that is:

  1. Not denominated in fiat currency.
  2. Is accepted by the public as a medium of exchange, to pay for goods or services, or discharge a debt.
  3. Can be transferred, stored or traded electronically.

MAS is proposing to combine the existing Payment Systems (Oversight) Act (Cap. 222A) and the Money-Changing and Remittance Business Act (Cap. 187).

The key proposals will:
  • Introduce a single payment services license to regulate existing and new payment services.
  • Implement a regulatory structure for significant payment systems and retail payment services.
  • Address regulatory risks and concerns.
The proposed regulated activities include:

(a) Account issuance services which would cover issuing or operating an e-wallet or a non-bank credit card.

(b) E-money issuance allowing the user to pay merchants or transfer e-money to another individual.

(c) Virtual currency services including buying or selling virtual currency or providing a platform to allow persons to exchange virtual currency.

AML/CTF obligations would be imposed which:

  • Deal in virtual currencies – i.e. buy and sell virtual currencies which involves exchanging virtual currency for fiat currency or another virtual currency; and/or
  • Facilitate the exchange of virtual currency. This would include establishing or operating a virtual currency exchange allowing participants to use the platform to exchange or trade virtual currencies.

The new requirements would apply to virtual currency service providers that process funds or virtual currency. The AML/CTF requirements would include identifying and verifying customer and beneficial owner identity, screening for AML and CTF concerns, suspicious transaction reporting, ongoing monitoring and record keeping.

The new ordinance would not however apply to regulated financial service providers, in-game assets and loyalty-points that are not denominated in fiat currency.


Section (3): “asset-backed securities” means debentures or units of debentures issued pursuant to a securitisation transaction;

“securitisation transaction” means an arrangement that involves the sale, transfer or assignment of assets to a special purpose vehicle where —

(a) such sale, transfer or assignment is funded by the issue of debentures or units of debentures (whether by that special purpose vehicle or another special purpose vehicle);

(b) payments in respect of such debentures or units of debentures are or will be principally derived, directly or indirectly, from the cash flows generated by the assets;

“special purpose vehicle” means an entity that is established solely in order to, or a trust that is established solely in order for its trustee to, do either or both of the following:

(a) hold (whether as a legal or equitable owner) the assets from which payments to holders of any asset-backed securities are or will be primarily derived;

(b) issue any asset-backed securities.

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