Singapore's new tokenization regulations

# New Digital Financial Reports  

Author: Zhang Feng  

## I. Singapore’s Response to the Global Tokenization Wave  

On November 14, 2025, the Monetary Authority of Singapore (MAS) officially released the *Guide on the Tokenisation of Capital Markets Products (CMP)*, marking a further deepening and systematization of Singapore’s efforts in the regulatory field of digital assets. This document represents a comprehensive update to the 2017 *Guide on the Offer of Digital Tokens* and aims to address the practical trend where tokenization activities for capital market products have expanded from the issuance end to the entire value chain, including trading, custody, and settlement. Adhering to its consistent regulatory philosophy of "technology neutrality" and "substance over form," Singapore has provided the most detailed regulatory blueprint to date for the tokenization of global capital markets.  

## II. Evolution from "Digital Tokens" to "Tokenized CMPs"  

At the outset of the *Guide*, MAS points out that since the release of the 2017 *Guide on the Offer of Digital Tokens*, tokenization activities have evolved from mere financing practices to encompass the "full value chain of capital markets." The term "tokenization" refers to the use of software programs to create digital tokens representing capital market products, which are typically deployed on programmable platforms such as distributed ledgers (DLT) to record and transfer ownership.  

This combination of technologies brings significant opportunities: CMPs can be digitally represented, fractionalized, stored, and exchanged, promising improved transaction efficiency, enhanced financial inclusion, and the unlocking of economic value. However, the application of DLT technology also introduces uncertainties regarding the applicability of securities laws and may give rise to technology-specific risks. MAS believes it is necessary to update the original *Guide on the Offer of Digital Tokens* to the *Guide on the Tokenisation of Capital Markets Products* to clarify the applicability of securities laws and other relevant legislation to two key areas:  

1. The issuance and offer of tokenized CMPs;  

2. Entity activities related to tokenized CMPs.  

## III. Technology Neutrality and the Principle of "Same Activity, Same Risk, Same Regulatory Outcome"  

The core principle of the *Guide* is "same activity, same risk, same regulatory outcome." MAS explicitly states that tokenized CMPs and non-tokenized CMPs are not economically different—their only distinction lies in form (e.g., digital tokens on a DLT network vs. physical certificates or electronic records in a centralized system). Therefore, regulatory focus should be on examining the economic substance of digital tokens, not their technical form.  

What constitutes a "Capital Markets Product (CMP)"? Under Section 2(1) of the *Securities and Futures Act (SFA)*, CMPs include securities (such as shares, bonds, and units in business trusts), units in collective investment schemes (CIS), derivative contracts, and spot foreign exchange contracts for leveraged foreign exchange trading. In the *Guide*, MAS emphasizes that determining whether a digital token qualifies as a CMP requires a holistic assessment of its characteristics, purpose, structure, and the "bundle of rights" attached to or derived from the token.  

To distinguish between CMPs and non-CMPs, Appendix 1 of the *Guide* provides 17 detailed cases illustrating when digital tokens constitute CMPs (e.g., shares, bonds, CIS units, derivative contracts) and when they do not. Examples include:  

- **Case 1**: Token A, which represents ownership in a company, constitutes a share and must comply with prospectus requirements.  

- **Case 2**: Token B, which represents a right to a loan from an entity, constitutes a bond, and the issuance platform must hold a Capital Markets Services (CMS) license.  

- **Cases 6 & 7**: Token G and Token H, which represent interests in a basket of assets (e.g., equity in fintech startups, gold), constitute CIS units and must meet both prospectus requirements and CIS authorization/recognition requirements.  

- **Case 10**: Token K, which is only used to pay for the rental of computing resources on a platform, does not constitute a CMP.  

- **Case 14**: Token O, a "meme token" with no actual rights and purely recreational purposes, does not constitute a CMP.  

MAS specifically emphasizes that it deliberately avoids using labels such as "utility tokens," "security tokens," or "native/non-native tokens" to prevent regulatory arbitrage or misunderstandings within the industry driven by such categorizations.  

## IV. End-to-End Compliance Paths for Issuance and Offer  

### Prospectus Requirements and Exemptions  

For tokenized CMPs that qualify as securities, securities-based derivative contracts, or CIS units, their public issuance must comply with Part 13 of the *SFA*, including the preparation and registration of a prospectus. However, the *Guide* also explicitly lists the following exemptions:  

- Small-scale offerings (not exceeding SGD 5 million within 12 months);  

- Private placements (to no more than 50 persons within 12 months);  

- Offerings exclusively to institutional investors;  

- Offerings to accredited investors (subject to specific conditions).  

### Disclosure Focus: "Tokenization-Specific Risks"  

The *Guide* requires that the prospectus for a tokenized CMP must disclose information reasonably necessary for investors and their professional advisors—particularly information related to tokenization-specific characteristics. MAS outlines the following categories of required disclosures in the *Guide*:  

1. **Tokenization characteristics**: Including the type of underlying DLT technology, smart contract governance, token minting/transfer/redemption/burning processes, and the roles of key intermediaries.  

2. **Rights and obligations**: Including the rights attached to the token (whether it represents legal or beneficial ownership), the method of recording ownership (on-chain/off-chain), and the issuer’s right to modify or override on-chain records.  

3. **Custody arrangements**: Including the method of token custody (self-custody, issuer custody, third-party custody), private key management processes, and custody arrangements for underlying assets (if any).  

4. **Risk disclosures**: Including technology and cybersecurity risks (e.g., smart contract vulnerabilities, cyberattacks, forks), operational risks (e.g., failure of third-party service providers), legal and regulatory risks (e.g., uncertainty regarding the legal status of tokens under property law), custody risks (e.g., loss of private keys), and liquidity risks.  

### Distribution Safeguards: Equal Application of the Complex Products Framework  

Like non-tokenized CMPs, tokenized CMPs are subject to the same complex products framework and must be classified as either "complex" or "non-complex." Whether a tokenized CMP is complex depends on the characteristics of the product itself, not its tokenized form. For example, tokenized shares are typically classified as non-complex products.  

## V. Licensing Requirements for Intermediary Activities and AML/CFT Obligations  

### Licensing Requirements  

The *Guide* clarifies that entities engaging in activities related to tokenized CMPs may be required to hold the following licenses:  

1. **Primary market platform operators**: May engage in "regulated activities" and must hold a Capital Markets Services (CMS) license.  

2. **Trading platform operators**: If platform trading involves tokens that are securities, derivative contracts, or CIS units, the platform may constitute an "organized market" and must be approved as a recognized exchange or recognized market operator.  

3. **Custody service providers**: If an entity has "control" over clients’ tokens (including control over private keys or their shards), it may need to hold a CMS license to provide custody services.  

4. **Financial advisors**: Entities providing financial advisory services on tokenized CMPs must hold a financial advisor license or qualify as an exempt financial advisor.  

### Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT)  

MAS emphasizes that specified persons engaging in activities related to tokenized CMPs must comply with AML/CFT requirements set out in relevant MAS notices, including:  

- Identifying, assessing, and understanding their money laundering/terrorist financing (ML/TF) risks;  

- Developing and implementing policies, procedures, and controls related to customer due diligence (CDD), transaction monitoring, screening, suspicious transaction reporting, and record-keeping;  

- Applying enhanced measures for high-risk scenarios;  

- Complying with requirements for the transfer of value of tokenized CMPs.  

In addition, all persons must comply with suspicious transaction reporting obligations under the *Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act* and prohibitions under the *Terrorism (Suppression of Financing) Act* and United Nations sanctions regulations.  

## VI. Cross-Border Application and Regulatory Sandboxes  

### Cross-Border Application  

The *Guide* clarifies that even if an issuance or activity is partially conducted outside Singapore, the *SFA* may still apply extraterritorially if it has a "material and reasonably foreseeable impact" on Singapore.  

### Regulatory Sandboxes  

MAS encourages companies using technology in innovative ways to conduct regulated activities to apply for entry into the "FinTech Regulatory Sandbox." During the sandbox period, MAS will relax specific legal and regulatory requirements to provide space for testing innovations. However, MAS also explicitly states that the offer of tokenized CMPs itself is generally not within the scope of the sandbox.  

## VII. Regulatory Paths: Singapore, the United States, and Hong Kong  

### Comparison with the U.S. SEC’s Regulatory Philosophy  

The U.S. Securities and Exchange Commission (SEC) has long relied on the "Howey Test" to determine whether a token constitutes an "investment contract" (and thus a security) in its regulation of digital assets. SEC Chairman Gary Gensler has repeatedly emphasized that "the vast majority of tokens" should be subject to securities laws, though his latest remarks have clarified that investment contracts can terminate and the legal nature of token assets may change.  

In contrast, MAS’s *Guide* provides a more structured analytical framework and a wealth of case examples. While its principles of "technology neutrality" and "substance over form" align in spirit with the U.S. Howey Test, the *Guide* is significantly more operable and predictable. In Case 17 of the *Guide*, MAS explicitly states that "the outcome under the Howey Test is not a consideration in determining whether a token is a CMP under the SFA," highlighting its independent stance on the application of law.  

### Comparison with Hong Kong’s Regulatory Framework  

Since 2018, the Securities and Futures Commission (SFC) of Hong Kong has gradually built a virtual asset regulatory framework through a series of statements, circulars, and the *Guide for Virtual Asset Trading Platform Operators*. In 2023, Hong Kong introduced guidelines on tokenized securities and tokenized SFC-authorized funds, allowing tokenized issuances under specific conditions. From 2024 to 2025, Hong Kong further launched a tokenized assets sandbox and released a digital asset policy statement, establishing a direction for the regularized issuance of tokenized government bonds.  

However, compared with Singapore’s *Guide*, Hong Kong’s framework has the following limitations:  

1. **Narrower scope**: It focuses more on the binary classification of "security tokens" and "non-security tokens" rather than covering "capital market products" in a comprehensive manner.  

2. **Limited case guidance**: It has not yet provided a detailed case library like Singapore’s, leaving the industry facing uncertainties in practical operations.  

3. **Incomplete end-to-end coverage**: Regulatory details for secondary market trading, custody, and settlement of tokenized CMPs remain to be clarified.  

The release of Singapore’s *Guide* undoubtedly creates policy competition pressure on Hong Kong. If Hong Kong intends to consolidate its position as a global fintech hub, it may need to promptly introduce a comprehensive framework comparable to Singapore’s—covering a broader range of CMPs such as tokenized securities, funds, and derivatives—to remain competitive.  

## VIII. Industry Guidance and Future Outlook  

1. **Clarifying compliance paths to reduce regulatory uncertainty**: Through the "technology neutrality" principle and numerous case examples, the *Guide* provides clear compliance guidance for the industry. Issuers and intermediaries can use the *Guide* to determine whether their business constitutes regulated activities and what disclosure, licensing, and conduct requirements they must meet.  

2. **Emphasizing "substance over form" to prevent regulatory arbitrage**: MAS explicitly states that its focus is on the "economic substance" of tokens, not their technical form or market labels. This effectively prevents regulatory evasion through technical packaging and ensures fair competition in the market.  

3. **Balancing innovation and risk mitigation**: Through the regulatory sandbox mechanism and continuous policy updates, MAS creates space for innovation while emphasizing comprehensive mitigation of technical risks, operational risks, legal risks, and custody risks.  

## IX. Singapore’s Guide Ripples Across Hong Kong’s Financial Waters  

The release of Singapore’s *Guide on the Tokenisation of Capital Markets Products* is a key step in building a "responsible digital asset ecosystem." With its comprehensiveness, clarity, and forward-looking nature, the document sets a new regulatory benchmark for the tokenization of global capital markets.  

In the face of Singapore’s proactive efforts, has Hong Kong felt the "chill before the spring" amid the evolving financial landscape? As another major international financial center in Asia, Hong Kong has made a solid start in virtual asset regulation but still lags behind in the depth and breadth of tokenizing traditional financial products. If Hong Kong can draw on Singapore’s experience, promptly introduce a comprehensive framework covering all types of tokenized CMPs (such as securities, funds, and derivatives), and complement it with equally detailed case guidance, it is expected to form a良性 (benign) "twin-city dynamic" with Singapore in the competitive high ground of tokenization—an area critical to the future of finance. Otherwise, the impact on Hong Kong’s financial sector may be far more than just a "ripple."  

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