Issuing tokens & decentralised finance (DeFi)

Your business description

Centralised crypto exchange with decentralised settlement. Looking to issue our own utility token and apply for Payment Service licence.

Are cryptocurrencies and other crypto assets regulated in Singapore? If so, how are they regulated?


"In Singapore, digital payment token service providers are regulated primarily for the purpose of preventing money laundering and terrorist financing. MAS had said earlier that the regulation does not extend to consumer protection and MAS does not regulate the digital payment token itself."

Source: Straits Times, last revised on 2 October 2021


According to MAS (Speeches)
last revised on 9 November 2021

We define tokens (referring to crypto tokens) that are used for payments purposes as digital payment tokens, and entities which provide services related to such tokens in Singapore are subject to licensing and supervision by MAS, primarily for money laundering and terrorism financing risks.

(Edits by FinReg)


"Cryptocurrencies are not regulated by MAS. They are not legal tender or securities. Persons that buy or sell cryptocurrencies, or facilitate the exchange of cryptocurrencies may be regulated under the Payment Services Act 2019 for money-laundering and terrorism financing risk only."

"Offers of digital tokens that are securities may be regulated or exempted under the Securities and Futures Act, e.g. if they are offered to accredited or institutional investors only, or are exempted small offers and private placements. These exemptions come with specific conditions such as advertising restrictions."

Source: MoneySense, last revised on 3 July 2021


Is cryptocurrency considered legal tender? 

According to MAS (Speeches)
last revised on 9 November 2021

Are cryptocurrencies money? So far, the answer must be no. Cryptocurrencies have performed poorly as a medium of exchange, a store of value, or a unit of account. MAS prefers to call them by their more accurate technical name: crypto tokens...

But to be regarded as money, crypto tokens need to be more stable in value and have credible backing...

What is an initial coin offering (ICO)? Is it regulated?


An ICO is an offer for sale of new digital tokens. A digital token is a digital representation of the rights of the holders of the token to receive a benefit or perform specified functions. Digital tokens and cryptocurrencies are both non-tangible assets that are created, traded and stored digitally. They use cryptography to encrypt and assure the authenticity of the digital assets.

Offers of sale of digital tokens are regulated in Singapore if the digital tokens constitute "capital markets products" under the Securities and Futures Act ("SFA"). When a digital token constitutes a "capital market products", the offer of the digital token may only be made to the retail public if the offer complies with, among other things, the prospectus requirements set out in Part XIII of the SFA, unless the offer is made pursuant to the exemptions prescribed in the SFA.

For more information, please click here for the MAS "Guide to Digital Token Offerings".

If the coin in question falls within the definition of a capital markets product (e.g. a security, a debenture or unit in a collective investment scheme), then the ICO is subject to the regulatory regime under Part XIII of the SFA, such as compliance with prospectus requirements, authorisation or recognition requirements in the case of a collective investment scheme, or otherwise avail itself to the applicable exemptions afforded under the SFA (such as offers to accredited or institutional investors, private placements or small offers).

If, however, the coin is considered as a digital payment token, then the offer of the coin may be considered as digital payment tokens, which is regulated as a digital payment token service under the PSA.

We are involved in the development and launch of a DeFi NFT gaming project and we are looking to issue tokens as part of our new game, what legal or regulatory considerations are there?


From a Singapore legal perspective, it is important to consider whether the gaming tokens would constitute “digital payment tokens” under the Payment Services Act No. 2 of 2019 (the “PS Act”) and fall within the definition of DPTs under Section 2(1) of the PS Act: 

any digital representation of value (other than an excluded digital representation of value) that:-

  1. is expressed as a unit;
  2. is not denominated in any currency, and is not pegged by its issuer to any currency;
  3. 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;
  4. can be transferred, stored or traded electronically; and
  5. satisfies such other characteristics as the Authority may prescribe.

Licensing under the PS Act: If the issued tokens constitute DPTs, a game developer may be required to obtain a Standard Payment Institution licence or a Major Payment Institution licence depending on the quantum of monthly transactions pursuant to the PS Act. Every applicant for such licences under the PS Act must be an incorporated company, not an individual, with its permanent place of business or registered office in Singapore, and at least one executive director who is a Singapore citizen or Permanent Resident.

How are proceeds from a token sale taxed in Singapore?


"Generally, the ICO company is treated to be carrying on a trade of trading in payment tokens and the tokens will be treated as its trading stock. Hence, the proceeds from the issuance of payment tokens will be taxable.

The issuance of a utility token comes with an obligation for the issuer to provide a service in the future. Hence, the proceeds from the issuance represent consideration for the payment of the service, and is taxable, being revenue in nature. 

The issuance of security tokens confers certain contractual rights and economic entitlements to the investor.These can be akin to those conferred to an equity shareholder, a debt holder or other holder of the securities or investment assets/instruments. In this respect, the proceeds from the issuance of security token is akin to those from the issuance of securities or other investment assets and is thus capital in nature and not taxable."

e-Tax Guide on Income Tax Treatment of Digital Tokens (9 October 2020)

Does Singapore impose taxes on fiat on/off ramp transactions?


For digital payment tokens, no.

According to IRAS e-Tax Guide on GST: Digital Payment Tokens

last revised on 4 November 2019

"With effect from 1 Jan 2020, supplies of digital payment tokens (cryptocurrency that fall within the MAS’s definition of “digital payment tokens”) will no longer be subject to GST. Specifically:

(i) The use of digital payment tokens as payment for goods or services will no longer give rise to a supply of those tokens. That is, if you use digital payment tokens to pay for the purchase of goods or services, you need not account for GST on the use.

(ii) A supply of digital payment tokens in exchange for fiat currency or other digital payment tokens, and the provision of any loan, advance or credit of digital payment tokens will be exempt from GST. Therefore, the supply of such tokens, being an exempt supply, will not contribute to your annual taxable turnover for the determination of your liability for GST registration."

Note that GST still applies to crytocurrencies outside the MAS definition of a "digital payment token".

For initial coin offerings (ICOs), "Taxes on ICO proceeds are dependent on whether the proceeds are considered as revenue and sourced in Singapore." "Generally, for an ICO of a utility token, ICO proceeds will be treated as deferred revenue (and hence taxable under the Income Tax Act). Whereas for an ICO of a security token, ICO proceeds will be capital in nature and thus not taxable."

According to IRAS (Pages)

However, note that "Businesses that buy and sell digital tokens in the ordinary course of their business are taxed on the profit derived from trading in the digital token. Profits derived by businesses which mine and trade digital tokens in exchange for money are also subject to tax."

On the other hand, "Businesses that buy digital tokens for long-term investment purposes may enjoy capital gains from the disposal of these digital tokens. However, as there are no capital gains taxes in Singapore, such gains are not subject to tax."