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 "Guidelines on the Tokenization of Capital Markets Products" (GUIDE ON THE TOKENISATION OF CAPITAL MARKETS PRODUCTS), marking a further deepening and systematization of Singapore's regulatory framework in the field of digital assets. This document is a comprehensive upgrade of the 2017 "Guidelines on the Issuance of Digital Tokens," aimed at responding to the real trend of tokenization activities in capital markets expanding from issuance to the entire chain of trading, custody, and clearing. Singapore, with its consistent regulatory philosophy of "technology neutrality and substance over form," provides the most detailed regulatory blueprint for global capital market tokenization to date.
II. The Evolution from "Digital Tokens" to "Tokenized CMP"
The MAS points out at the beginning of the "Guidelines" that since the release of the "Guidelines on the Issuance of Digital Tokens" in 2017, tokenization activities have expanded from mere financing to encompass the "full value chain of capital markets." Tokenization refers to the use of software programs to create digital tokens representing capital market products, typically deployed on programmable platforms such as distributed ledgers, to achieve the recording and transfer of ownership.
This technological combination brings significant opportunities: CMP can be digitally represented, fragmented, stored, and exchanged, potentially enhancing trading efficiency, increasing financial inclusivity, and unlocking economic value. However, the application of Distributed Ledger Technology (DLT) also introduces uncertainties regarding the applicability of securities law and may introduce technology-specific risks. The MAS believes it is necessary to update the original "Guidelines on the Issuance of Digital Tokens" to the "Guidelines on the Tokenization of Capital Markets Products" to clarify the applicability of securities law and other relevant legislation to the following two aspects: the issuance and sale of tokenized CMP; and the substantive activities related to tokenized CMP.
III. Technology Neutrality and "Same Activity, Same Risk, Same Regulatory Outcome"
The core principle of the "Guidelines" is "same activity, same risk, same regulatory outcome." The MAS clearly states that tokenized CMP and non-tokenized CMP are economically indistinguishable, with the only difference being their form (e.g., digital tokens on a DLT network vs. physical certificates or electronic records in a centralized system). Therefore, the regulatory focus is on examining the economic substance of digital tokens rather than their technological form.
What is a "Capital Markets Product"? According to Section 2(1) of the Securities and Futures Act, CMP includes securities (including stocks, bonds, units of business trusts), units of collective investment schemes, derivative contracts, and spot foreign exchange contracts used for leveraged forex trading, among others. The MAS emphasizes in the "Guidelines" that to determine whether a digital token constitutes CMP, one should comprehensively examine its characteristics, intent, structure, and the "bundle of rights" attached to or derived from the token.
What is CMP, and what is non-CMP? Appendix 1 of the "Guidelines" provides 17 cases detailing the circumstances under which digital tokens constitute stocks, bonds, CIS units, derivative contracts, etc., and the circumstances under which they do not constitute CMP. For example:
Case 1: Token A, representing ownership in a company, constitutes a stock and must comply with prospectus requirements.
Case 2: Token B, representing rights to a physical loan, constitutes a bond, and the issuing platform must hold a capital markets services license.
Cases 6 & 7: Tokens G and H, representing rights to a basket of assets (such as equity in FinTech startups, gold), constitute CIS units and must meet both prospectus requirements and CIS authorization/recognition requirements.
Case 10: Token K, used solely for renting computing resources on a payment platform, does not constitute CMP.
Case 14: Token O, which has no actual rights and is purely for entertainment, does not constitute CMP.
The MAS particularly emphasizes that it deliberately avoids using labels such as "utility tokens," "security tokens," or "native/non-native tokens" to prevent regulatory arbitrage or misunderstandings arising from labeling.
IV. Compliance Path for Issuance and Sale Across the Entire Chain
Prospectus and Exemption Situations. For tokenized CMP that constitutes securities, securities derivative contracts, or CIS units, public offerings must comply with the provisions of Part 13 of the Securities and Futures Act, including the preparation and registration of a prospectus. However, the "Guidelines" also clearly list the following exemption situations:
Small offerings (not exceeding SGD 5 million within 12 months);
Private placements (not exceeding 50 persons within 12 months);
Only targeting institutional investors;
Targeting qualified investors (who must meet specific conditions).
Information Disclosure Focused on "Tokenization Characteristics Risks." The "Guidelines" require that the prospectus for tokenized CMP must disclose information reasonably required by investors and their professional advisors, particularly information related to tokenization characteristics. The MAS lists the following categories of information that must be disclosed:
Tokenization Characteristics: Including the type of underlying DLT technology, smart contract governance, token minting/transferring/redeeming/burning processes, key intermediary roles, etc.
Rights and Responsibilities: Including the rights attached to the token (whether it represents legal or beneficial ownership), the method of ownership record (on-chain/off-chain), the issuer's rights to modify or overwrite on-chain records, etc.
Custody Arrangements: Including the custody method of the token (self-custody, issuer custody, third-party custody), private key management processes, custody arrangements for underlying assets (if any), etc.
Risk Disclosure: Including technology and cybersecurity risks (such as smart contract vulnerabilities, network attacks, forks), operational risks (such as third-party service provider failures), legal and regulatory risks (such as uncertainty regarding the legal status of tokens under property law), custody risks (such as loss of private keys), liquidity risks, etc.
Distribution Assurance: Complex Product Framework Equally Applicable. Tokenized CMP, like non-tokenized CMP, is subject to the same complex product framework and must be classified as "complex" or "non-complex" products. Whether tokenized CMP is complex depends on the characteristics of the product itself, rather than its tokenized form. For example, tokenized stocks are typically classified as non-complex products.
V. Licensing Requirements for Intermediary Activities and AML/CFT Obligations
Licensing Requirements. The "Guidelines" clearly state that entities engaging in activities related to tokenized CMP may need to hold the following licenses:
Primary Market Platform Operators. May engage in "regulated activities" and must hold a capital markets services license.
Trading Platform Operators. If the platform trades tokens that constitute securities, derivative contracts, or CIS units, it may constitute an "organized market" and must be approved as a recognized exchange or recognized market operator.
Custody Service Providers. If they have "control" over client tokens (including control of private keys or their shards), they may need to hold a capital markets services license for providing custody services.
Financial Advisors. Entities providing financial advisory services related to tokenized CMP must hold a financial advisor license or be exempt financial advisors.
Anti-Money Laundering and Countering the Financing of Terrorism. The MAS emphasizes that specific personnel engaged in activities related to tokenized CMP must comply with the AML/CFT requirements in relevant MAS notices, including:
Identifying, assessing, and understanding their ML/TF risks;
Developing and implementing policies, procedures, and controls related to customer due diligence, transaction monitoring, screening, suspicious transaction reporting, and record-keeping;
Taking enhanced measures for high-risk situations;
Complying with the requirements for the value transfer of tokenized CMP.
Additionally, all personnel must comply with the suspicious transaction reporting obligations under the "Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act," as well as the prohibitions under the "Terrorism (Suppression of Financing) Act" and United Nations sanctions regulations.
VI. Cross-Border Applicability and Regulatory Sandbox
Cross-Border Applicability. The "Guidelines" clarify that even if part of the issuance or activity occurs outside Singapore, as long as it has a "substantial and reasonably foreseeable impact" on Singapore, the Securities and Futures Act may still have extraterritorial applicability.
Regulatory Sandbox. The MAS encourages companies that engage in regulated activities using technology in innovative ways to apply for entry into the "FinTech Regulatory Sandbox." The MAS will relax specific legal and regulatory requirements during the sandbox period to provide a testing space for innovation. However, the MAS also clearly states that the issuance of tokenized CMP itself is generally not within the scope of the sandbox.
VII. Regulatory Paths of Singapore, the U.S., and Hong Kong
Comparison with U.S. SEC Regulatory Philosophy. The U.S. SEC has long relied on the "Howey Test" to determine whether tokens constitute "investment contracts" and thus fall under securities. SEC Chairman Gary Gensler has repeatedly emphasized that "the vast majority of tokens" should be subject to securities law, but his latest remarks have clarified that investment contracts can terminate, and the legal nature of token assets may change.
The MAS's "Guidelines" provide a more structured analytical framework and a wealth of case studies. Its principles of "technology neutrality" and "substance over form" resonate with the spirit of the U.S. "Howey Test," but are significantly superior in terms of operability and foreseeability. The MAS explicitly states in Case 17 that "the outcome under the Howey Test is not a consideration for determining whether a token is CMP under the SFA," highlighting its independent legal applicability stance.
Comparison with Hong Kong's Regulatory Framework. Since 2018, the Hong Kong Securities and Futures Commission has gradually built a virtual asset regulatory framework through a series of statements, circulars, and "Guidelines for Virtual Asset Trading Platform Operators." In 2023, Hong Kong introduced guidelines related to tokenized securities and tokenized SFC-recognized funds, allowing tokenized issuance under specific conditions. From 2024 to 2025, Hong Kong will continue to launch a tokenized asset sandbox and issue digital asset policy statements, establishing a direction for the normalization of government bond tokenized issuance.
However, compared to Singapore's "Guidelines," Hong Kong's framework:
Has a relatively narrow scope, focusing more on the dichotomy of "security tokens" and "non-security tokens," rather than comprehensively covering "capital markets products."
Has limited case guidance, and has not provided as detailed a case library as Singapore, leaving the industry facing uncertainties in specific operations.
Lacks comprehensive coverage, with regulatory details for tokenized CMP in secondary market trading, custody, clearing, and other aspects still needing clarification.
The release of Singapore's "Guidelines" undoubtedly poses competitive policy pressure on Hong Kong. If Hong Kong wishes to solidify its position as a global fintech center, it may need to quickly introduce a comprehensive framework covering tokenized securities, funds, derivatives, and other broader CMPs that is equivalent to Singapore's.
VIII. Guidance for the Industry and Future Outlook
Clarifying Compliance Pathways, Reducing Regulatory Uncertainty. The "Guidelines" provide clear compliance navigation for the industry through the principle of "technology neutrality" and numerous case studies. Issuers and intermediary institutions can determine whether their business constitutes regulated activities based on the "Guidelines," as well as what disclosure, licensing, and conduct requirements they must meet.
Emphasizing "Substance Over Form," Preventing Regulatory Arbitrage. The MAS clearly states that its focus is on the "economic substance" of tokens rather than their technological form or market labels. This effectively prevents behaviors that evade regulation through technological packaging, ensuring fair competition in the market.
Encouraging Innovation While Balancing Risk Prevention. Through the regulatory sandbox mechanism and ongoing policy updates, the MAS emphasizes comprehensive prevention of technological risks, operational risks, legal risks, and custody risks while leaving space for innovation.
IX. Singapore's Guidelines Ripple Through the Waters of Victoria Harbour
The release of Singapore's "Guidelines on the Tokenization of Capital Markets Products" is a key step in building a "responsible digital asset ecosystem." This document, with its comprehensiveness, clarity, and foresight, sets a new regulatory benchmark for global capital market tokenization.
In the face of Singapore's proactive approach, has Hong Kong felt the "chill of spring" before the "warm waters of spring"? As another major international financial center in Asia, Hong Kong has made a good start in virtual asset regulation, but still lags behind in the depth and breadth of tokenizing traditional financial products. If Hong Kong can learn from Singapore's experience and quickly introduce a comprehensive framework covering all categories of tokenized securities, funds, derivatives, and other CMPs, along with equally detailed case guidance, it is expected to form a positive interactive dual-city pattern with Singapore in this future financial competitive landscape of tokenization. Otherwise, the waters of Victoria Harbour may not merely be "rippled."
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