Apr 2024

Singapore

Law Over Borders Comparative Guide:

Cryptoassets

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1 . Are cryptoassets (including, for example, cryptocurrencies, stablecoins and non-fungible tokens) defined and, if so, what are the major elements?

Cryptoassets (including cryptocurrencies, stablecoins and non-fungible tokens (NFTs)) are not specifically defined in Singapore legislation. However, they might have characteristics that fit the definition of terms used in various local legislations and would be treated accordingly.

For example, some cryptoassets fall under the definition of a “digital payment token” which is a term used in the Payment Services Act 2019 (PSA), a statute that provides for the licensing and regulation of payment service providers, the oversight of payment systems, and other connected matters. The term “digital payment token” is defined as any digital representation of value that:

  • is expressed as a unit; 
  • is not denominated in any currency, and is not pegged by its issuer to any currency; 
  • is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt; 
  • can be transferred, stored or traded electronically; and 
  • satisfies such other characteristics as the Monetary Authority of Singapore (MAS), Singapore’s Central Bank and financial regulator, may prescribe. 

Cryptocurrencies like Bitcoin (BTC) and Ether (ETH), and stablecoins like USD Coin (USDC) and Tether (USDT) have been identified as falling within the definition of a “digital payment token”. 

Some cryptoassets may also fit the definition of a “capital market product” (CMP) under the Securities and Futures Act 2001 (2020 Rev Ed) (SFA), a statute that provides for the regulation of activities and institutions in the securities and derivatives industry in Singapore. The term “capital market product” is defined as “any securities, units in a collective investment scheme, derivatives contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading, and such other products as the Authority [i.e. the MAS] may prescribe as capital markets products”. According to the MAS, cryptoassets may constitute the following categories of CMPs:

  • a share, if the cryptoasset confers or represents ownership interest in a corporation, represents liability of the cryptoasset holder in the corporation, and represents mutual covenants with other token holders in the corporation inter se;
  • a debenture, if the cryptoasset constitutes or evidences the indebtedness of the issuer of the cryptoasset in respect of any money that is or may be lent to the issuer by the holder of the cryptoasset; 
  • a unit in a business trust, where the cryptoasset confers or represents ownership interest in the trust property of a business trust;
  • a securities-based derivatives contract, which includes any derivatives contract of which, the underlying thing is a share, debenture or unit in a business trust; or
  • a unit in a collective investment scheme (CIS), where the cryptoasset represents a right or interest in a CIS, or an option to acquire a right or interest in a CIS.

Order 22 of the Singapore Rules of Court 2021 (Cap 322) (ROC 2021) also defines “cryptocurrency or other digital currency” as “movable property”, which can be the subject of an enforcement order to enforce orders or judgments made by the Singapore Court.

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2 . What are the major laws/regulations specifically related to cryptoassets?

The major laws/regulations in Singapore that are most relevant to cryptoassets are the PSA and the SFA, as well as the Financial Services and Markets Act 2022 (FSMA).

The PSA is relevant to cryptoassets because it provides, among other things, the licensing and regulation of digital payment token service providers (DPT Service Providers) who carry on business in Singapore.

The SFA is relevant to cryptoassets because some cryptoassets might have characteristics that fulfil the definition of a CMP, and would therefore be subjected to regulation under the SFA. The MAS has, in its publication titled “A Guide to Digital Token Offerings” dated 26 May 2020, listed several examples of how some cryptoassets might have characteristics of various CMPs that would require their issuers to comply with the requirements under the SFA (e.g. preparing and registering an accompanying prospectus).

The FSMA is relevant to cryptoassets because it, among other things, regulates DPT Service Providers in Singapore who provide services outside of the country. As the PSA only regulates DPT Service Providers that conduct business in Singapore, the FSMA ensures that service providers who provide services overseas do not claim to be headquartered in Singapore just to take advantage of Singapore’s reputation. As of the date of writing, the licensing regime in the FSMA has not yet come into force, but is targeted to be implemented in 2024.

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3 . How are different types of cryptoassets regulated?

The applicable regulation is dependent on the characteristics of the cryptoasset, and the services provided in relation to them. If a cryptoasset’s characteristics make it a “digital payment token” under the PSA and FSMA, DPT Service Providers will need to be licensed and regulated accordingly. If a cryptoasset has characteristics that fulfil the definition of a CMP under the SFA, then the regulations imposed by the SFA will apply.

Broadly speaking, and bearing in mind that one must look beyond the labels and examine each cryptoasset on its own case to determine what laws and regulations apply: 

  • Payment tokens, which refer to cryptoassets that are designed to be used as a method of payment for goods or services (e.g. BTC and ETH), would generally fall under the definition of “digital payment tokens” under the PSA and FSMA.
  • Stablecoins, which are cryptoassets that aim to maintain a stable value relative to a specified asset (typically a unit of fiat currency or commodity), or a pool or basket of assets, would also generally constitute “digital payment tokens” and be regulated under the PSA and FSMA. 
  • Security tokens, which could, for example, be structured to represent shares in a company or a debenture, would generally constitute CMPs and be regulated under the SFA.
  • Utility tokens that give token holders the right to access the issuer’s platform, pay for specific services offered on the platform and/or vote on features of the platform, that do not have other rights or functions attached to them, and that are not or are not intended to be a medium of exchange accepted by the public or a section of the public as payment for goods or services or for the discharge of a debt, might not be regulated under the SFA, PSA or FSMA.
  • NFTs, which are unique digital tokens that have often been used to tokenise digital art, are also generally not regulated under the SFA, PSA, or FSMA.
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4 . Is there an authorisation/licensing regime applicable to cryptoasset issuers/providers/exchanges and, if so, what are the requirements?

There are licensing regimes in Singapore that apply to cryptoasset issuers/providers/exchanges (Cryptoasset Service Providers) which are dependent on the nature of their businesses as well as the characteristics of the cryptoassets that they deal with.

Licensing regime under the PSA. For Cryptoasset Service Providers offering digital payment token services in Singapore relating to “digital payment tokens” or “e-money”, the PSA would apply. Under the PSA, Cryptoasset Service Providers have to be licensed under either: 

  • the Standard Payment Institution licence (SPI Licence); or 
  • the Major Payment Institution Licence (MPI Licence). 

Cryptoasset Service Providers should apply for the SPI Licence if they only provide payment services below the specified thresholds in section 6(5) of the PSA 2019.

The requirements that need to be fulfilled for a SPI Licence or a MPI Licence can be found in the PSA and the MAS “Guidelines on Licensing for Payment Service Providers [PS-G01]” (the Guidelines on Licensing) dated 18 December 2019. In summary, applicants will need to meet various governance and ownership, fit and proper, competency, place of business, minimum base capital, security, compliance, technology risk management, and audit requirements. The MAS also has the discretion to consider the applicant’s track record, financial condition, operational readiness, and whether the public interests will be served. Licensees will also need to comply, on an ongoing basis, with anti-money laundering (AML), combating the financing of terrorism (CFT), submission of regulatory returns, cyber hygiene, business conduct, disclosure and communications, and annual audit requirements as detailed in the Guidelines on Licensing.

Licensing under the FSMA. Cryptoasset Service Providers based in Singapore who provide digital payment token services outside of the country will soon need to apply for licences under the FSMA. The specific requirements for such licences have not yet been announced as this licensing regime has not come into force as at the date of writing, but it is targeted to be implemented in 2024. 

Licensing under the SFA. Cryptoasset Service Providers might need to be licensed under the SFA depending on the type of services they provide. For example, Cryptoasset Service Providers who operate a platform in relation to digital tokens which constitute CMPs may be considered to be carrying on business in one or more of the regulated activities under the SFA, and would need to apply for a capital market services licence.

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5 . Is the promotion of cryptoassets to consumers or investors regulated and, if so, how?

According to the MAS’ “Guidelines on Provision of Digital Payment Token Services to the Public [PS-G02]” dated 17 January 2022, entities licensed or exempted under the PSA should not promote their digital payment token services to the general public in Singapore. They are only allowed to promote their services on their own corporate website, mobile applications, or official social media accounts but they must not trivialise the risk of trading in digital payment tokens when doing so.

Individuals or corporations that are not licensed under the PSA are not allowed to promote their digital payment token services in Singapore, and doing so might constitute an offence under section 9 of the PSA.

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6 . What anti-money laundering requirements apply to cryptoassets?

Digital payment token service providers licensed under the PSA must all comply with the AML requirements set out by the MAS in its revised “Notice PSN02 Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service” (Notice PSN02) dated 1 March 2022. If a Cryptoasset Service Provider is regulated under the SFA, the MAS revised “Notice SFA04-N02 Prevention of Money Laundering and Countering the Financing of Terrorism – Capital Markets Intermediaries” (Notice SFA04-N02) dated 1 March 2022 would apply. These notices require the implementation of, among other things, risk assessment and mitigation for money laundering and terrorism financing, customer due diligence, record keeping measures, suspicious transactions reporting, the appointment of an AML/CFT compliance officer at the management level, and the provision of personal information of the customer in all transactions. 

Even if an entity is not regulated under the PSA or the SFA, it is still required to comply with Singapore’s general AML and CFT laws under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (2020 Rev Ed) (CDSA) and the Terrorism (Suppression of Financing) Act 2002 (2020 Rev Ed) (TSFA).

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7 . How is the ownership of cryptoassets defined or regulated?

The ownership of cryptoassets is not defined or regulated by any legislation in Singapore. Cryptoassets have generally been recognised and treated as property by the Singapore courts, which have granted proprietary injunctions, freezing injunctions, as well as declarations of constructive trusts over them.

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8 . How are Decentralised Autonomous Organisations (DAOs) treated?

There is no legislation or reported cases that specifically explain how Decentralised Autonomous Organisations (DAO) will be treated under Singapore law. 

A DAO will unlikely be treated as a company with a separate legal personality under Singapore law as it is not incorporated under the Companies Act 1967 (2020 Rev Ed) (Companies Act) or any corresponding previous written law. Even though DAOs seem to fulfil the legal definition of a “partnership” under the Partnership Act 1890 (2020 Rev Ed) (Partnership Act) of being “the relation which subsists between persons carrying on a business in common with a view of profit”, there are difficulties with characterising a DAO as a general partnership under Singapore law. For example, under Singapore law, general partnerships can only consist of 20 persons but membership in a DAO can exceed that number once more than 20 associated DAO tokens have been issued. Furthermore, DAO tokens can generally be easily traded on the blockchain or via digital token exchanges, which runs contrary to the principle of how a partnership interest is not meant to be readily tradable in a secondary marketplace.

A DAO might be treated as an unregistered unincorporated association under Singapore law that is based on contract(s) between its members. However, such unincorporated associations under Singapore law are not legal entities capable of suing or being sued in their own name, and have no legal existence separate from their members. Therefore, a member of a DAO or a third party might not be able to bring an action against the DAO itself, and might have to instead claim against all members of the DAO or, more realistically, members of the DAO who have control over the smart contracts that determine the DAO’s actions.

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9 . Are there any particular laws or rules which apply in the event of the crypto bankruptcy or insolvency?

There are no special laws or rules which specifically apply in the event of a bankruptcy or insolvency that involves cryptoassets. The Singapore courts have generally applied the established principles in insolvency and bankruptcy law to cases involving cryptoassets.

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10 . Is a smart contract enforceable as a legal contract?

Although the issue of whether smart contracts can constitute legal contracts has not yet been considered in any reported cases in Singapore, the answer is likely to be in the affirmative if the legal requirements for the formation of a contract are satisfied, namely: 

  • offer and acceptance; 
  • intention to create legal relations; and 
  • the existence of consideration.

Whether smart contracts are legally binding contracts under Singapore law will likely turn on the objective intentions of the parties. For example, a smart contract will more likely be treated as a legally binding contract if parties expressly or impliedly agree for their rights and obligations to be defined by the smart contract and to abide by the behaviour of the code, as opposed to a situation where parties agree for the smart contract to merely implement their agreement but not to define it. The facts and circumstances surrounding the parties’ interactions and transactions relating to the smart contract will likely be determinative.

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11 . What recourse does a victim of crypto fraud have?

Victims can file a claim against the fraudsters in the Singapore courts and apply for freezing injunctions against them and proprietary injunctions in respect of their cryptoassets. This was recently done in Singapore in the case of CLM v. CLN and others [2022] SGHC 46 (CLM), where the plaintiff, who had 109.83 BTC and 1,497.54 ETH stolen from him, successfully obtained freezing injunctions against the unknown fraudsters as well as proprietary injunctions in respect of his stolen cryptoassets.

If victims manage to trace their cryptoassets to cryptocurrency exchanges, they can also apply for disclosure orders against the exchanges to: 

  • find out how much of their assets remained in the relevant user account(s) with the exchange; 
  • continue tracing the cryptoassets that had been withdrawn; and 
  • identify the owners of the relevant user account(s) who might be involved in the fraud. 

Such disclosure orders were granted to the plaintiff in CLM who had traced his stolen assets to two cryptocurrency exchanges, which provided disclosures (see Question 6, above, as to the customer due diligence required) that enabled the plaintiff to identify and claim against two defendants for their believed involvement in the theft of his cryptoassets.

There are also procedures that victims can use to enforce judgments obtained against the fraudsters. For example, under Order 22 of the ROC 2021, “cryptocurrency or other digital currency” may be seized and sold pursuant to an enforcement order by “serving a notice of seizure on the person or entity having possession or control of the movable property”.

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12 . Are there any other ongoing legal or regulatory consultations or other legal frameworks in the pipeline relating to cryptoassets?

There are numerous ongoing legal and regulatory consultations as well as legal frameworks in the pipeline in Singapore that relate to cryptoassets. These include:

  • Introducing a new stablecoin regulatory framework. In “Response to Public Consultation on Proposed Regulatory Approach on Stablecoins-related Activities” dated 15 August 2023, MAS announced that a new stablecoin framework will be implemented which allows issuers of single-currency stablecoins (SCS) pegged to the Singapore dollar or any of the Group of Ten (G10) currencies to apply for their stablecoin to be labelled as a “MAS-regulated stablecoin”. The purpose of this label is to assist participants to distinguish MAS-regulated stablecoins, which are subjected to requirements under this new framework that give them a high degree of value stability, from other stablecoins or cryptoassets.
  • Implementing segregation and custody requirements on DPT Service Providers. In “Response to Public Consultation on Proposed Regulatory Measures for DPT Services Part 1” dated 3 July 2023, MAS announced that it will be issuing guidelines and implementing amendments to the Payment Services Regulations 2019 (PSR) (a subsidiary legislation of the PSA) relating to the segregation and custody by DPT Service Providers of their customers’ assets. These requirements include, among other things, the need for DPT Service Providers to segregate customers’ assets from their own, perform daily reconciliations, and keep at least 90% of customers’ cryptoassets in cold wallets. 
  • Implementing consumer access safeguards. In “Response to Public Consultation on Proposed Regulatory Measures for DPT Services Part 2” dated 23 November 2023, MAS announced that it will be putting in place a comprehensive set of regulatory measures to reduce the risk of consumer harm. These measures include, among other things, requiring DPT Service Providers to conduct risk awareness assessments on retail customers, imposing restrictions on the offering of incentives to retail customers to trade in digital payment tokens, and requiring DPT Service Providers to implement adequate policies and procedures to handle customer complaints.
  • Addressing market integrity risks and prohibiting unfair trading practices. In “Consultation Paper on Proposed Measures on Market Integrity in Digital Payment Token Services” dated 3 July 2023, MAS consulted the public on its proposed regulatory measures to address market integrity risks and its proposed prohibitions against unfair trading practices. These proposed measures include, among other things, requirements for DPT Service Providers to conduct surveillance to detect unfair trading practices, and making it an offence to engage in unfair trading practices like false trading, market rigging, market manipulation, bucketing, and cornering, in the context of digital payment tokens. MAS should be releasing its response announcing the measures that will be implemented after it has completed its review of the public’s feedback.

EXPERT ANALYSIS

Chapters

Australia

Emily Shen
Peter Reeves
Robert O'Grady

Bermuda

Andrew Chissick
Daniel Hayward-Hughes
Natalie Neto
Rachel Nightingale
Sara Hall
Steven White

British Virgin Islands

Andrew Chissick
Daniel Hayward-Hughes
Iain Tucker
Iona Wright
Jan Golaszewski
Sara Hall

Canada

Ana Badour
Barry Sookman
Heather Meredith
Hugo Babos-Marchand
Lori Stein
Shane D'Souza

Cayman Islands

Daniel Hayward-Hughes
Ian Mason
Jan Golaszewski
Jennifer Maughan
Sara Hall
Lucy Frew

Cyprus

Christopher Lytras
Leonidas Grivas

Czechia

Filip Murár
Luděk Chvosta

France

Hubert de Vauplane

India

Rohan Bagai
Shagun Badhwar

Italy

Alessandro M. Lerro

Portugal

Ashick Remetula
Carolina Nagy Correia
David Silva Ramalho
Luís Possolo
Márcia Tomás Pires
Nicole Fortunato
Vera Esteves Cardoso
Nuno Gundar da Cruz

Taiwan

Eddie Hsiung

United Arab Emirates

Alishia K. Sullivan
Andrea Dougall
Katherine Seager

United Kingdom

Jane Colston
Jessica Lee

United States

Clara Krivoy
Sharix Alicea
Stephen Palley

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