The Singapore FSMA Act is about to take effect, and the digital asset industry is facing strict regulation.

With the approach of June 30, 2025, the Monetary Authority of Singapore (MAS) is set to implement the Financial Services and Markets Act (FSMA), establishing a strict regulatory framework for the digital asset industry. This legislation aims to uphold Singapore's reputation as a global financial hub while mitigating the risks of money laundering and terrorism financing.

The FSMA primarily targets Digital Token Service Providers (DTSP), including businesses that have a physical presence in Singapore but mainly serve overseas customers. These services include the buying, selling, transferring, exchanging, custody, and advisory of digital tokens. The MAS requires DTSPs to obtain a license and comply with strict regulatory standards.

Recently, MAS provided detailed responses to questions raised by industry practitioners, covering multiple key areas:

1. License Application: MAS indicates that DTSP licenses are only granted in very rare circumstances. Applicants must demonstrate that their business model is reasonable, is regulated by standards that meet international criteria overseas, and that their company structure is sound. It is worth noting that there is no transition period; DTSPs that have not obtained a license must cease overseas services starting June 30, 2025.

2. Definition of business premises: MAS has not explicitly defined whether a residence constitutes a business premises, but emphasizes that the determination will be based on the substance of the business. If substantial business activities are conducted at home, it may be recognized as a business premises, requiring a license application.

3. License fees and capital requirements: The application fee and annual fee are both 10,000 SGD, and an additional capital of 250,000 SGD is required. Although some small businesses feel that these requirements are too high, MAS has stated that it will not make adjustments to ensure that applicants have sufficient financial strength.

4. Customer Due Diligence (CDD): After obtaining the license, DTSP needs to conduct CDD on existing customers again. MAS will determine the completion time based on the level of customer risk, but will not provide a fixed deadline. Businesses can hire third parties to assist with CDD, but they cannot be payment service companies.

5. Technical Risks and Cybersecurity: DTSP needs to ensure the stability of IT systems, the security of customer data, and report to MAS within 1 hour after a significant incident occurs. In addition, multiple cybersecurity measures need to be implemented, such as multi-factor authentication, firewalls, and regular system updates.

6. Behavior and Disclosure Requirements: DTSP must record transactions, issue receipts, publicly display exchange rates and fees, and establish fixed business hours. At the same time, it is necessary to issue risk warnings to customers, reminding them of potential loss risks.

7. Compliance Guidelines: MAS plans to publish a dedicated FAQ for DTSP, but emphasizes that companies need to customize their compliance solutions based on general financial guidelines.

For institutions that already hold other licenses or are exempted, the FSMA still imposes higher compliance requirements, including stricter technical risk management, submission of annual audit reports, and enhanced AML/CFT measures.

In the face of these stringent regulatory requirements, participants in the digital asset industry need to take swift action: assess whether their business needs to apply for a license, strengthen compliance system construction, proactively communicate with the MAS, and closely monitor subsequent regulatory guidelines. At the same time, companies may also consider adjusting their business models, seeking exemptions, or exploring alternative technologies to adapt to the new regulatory environment.

This regulatory move in Singapore will have a profound impact on the global digital asset industry, potentially prompting more companies to reassess their business strategies and compliance plans.