SINGAPORE Law and Practice Contributed by: Tju Liang Chua and Ulanda Oon, Drew & Napier LLC
5. Decentralised Finance 5.1 Ability to Use DeFi
cipally for display, circulation or use in Singapore; and • any reasonable step has been taken to guard against the provision of any PS to any person in Singapore. The MAS has also issued guidelines that apply to DPTSPs, banks and other FIs, which essentially restrict the promotion of DPT services to the general public in Singapore. Under these guidelines, DPTSPs should not engage in marketing or advertising DPT services in public areas in Singapore, or through third parties such as social media influencers, to promote DPT services to the general public in Singapore. The MAS has also warned that DPTSPs should not promote payment token derivatives to the public as a convenient unregulated alternative to trading in DPTs. However, DPTSPs may market or advertise on their own corporate websites, mobile applications or offi- cial social media accounts. Similarly, where digital assets constitute CMPs under the SFA, their offer, issuance or activities may fall within the SFA’s regulatory purview. Consequently, the issuer must ensure compliance with the relevant SFA requirements – including, for example, licensing and prospectus obligations – before offering those digital assets, or dealing with those assets, unless an applicable exemption is available. Such exemptions may include offers made exclusively to institutional or accredited investors, private placements or small offers. It is important to note, however, that these exemptions are contingent upon adherence to strin- gent conditions, including restrictions on advertising and specific disclosure obligations. There is no formal codified exemption for reverse solicitation in Singapore, unlike those found in the EU. 4.2 White Labelling Depending on what the white-label solution is, exter- nal firms may rely on certain exemptions to offer prod- ucts in Singapore. As Singapore’s regulatory regime is activity-based, the focus is on what activities such external firms are carrying out in Singapore. See also the restrictions on marketing set out in 4.1 Marketing .
Singapore has no specific DeFi regulations, but busi- nesses involved in DeFi will have to comply with pre-existing laws relevant to their services. See 2.2 Crypto-Asset Regulatory Frameworks . CeFi firms are permitted to utilise DeFi when provid- ing products and services. However, if CeFi firms are regulated under the PS Act, they are prohibited from facilitating the staking and lending of retail custom- ers’ assets. That said, there is no prohibition on such retail customers deploying their funds in DeFi inde- pendently of the regulated CeFi firms. 5.2 DeFi Structures The regulatory treatment of a DeFi operation in Sin- gapore depends on the specific activity concerned, making the choice of corporate structure closely tied to the nature of the underlying activity and its regula- tory characterisation. For example, operating a front-end interface for a decentralised exchange (DEX) is likely to fall within the scope of the PS Act, which governs DPT services. Where digital assets are pooled and collectively man- aged, even through automated means, this may raise questions concerning fund management licensing under the SFA. Conversely, the provision of pure tech- nical services in relation to DeFi may be eligible for the “technical services exemption” under the PS Act, and thus not be regulated. The appropriate corporate structure therefore depends on the products and ser- vices intended to be offered in or out of Singapore. Regarding decentralised autonomous organisations (DAOs), Singapore does not have bespoke DAO leg- islation. However, a number of projects have explored using existing corporate vehicles as legal wrappers for risk ring-fencing purposes. In particular, the pub- lic company limited by guarantee structure has been used, as it cannot distribute profits or dividends to its members, and upon winding up, remaining assets must be transferred to organisations with similar objectives or to a registered charity.
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