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5. SUMMARY

5.1 A summary of the regulatory treatment of Digital Assets is shown in the table below.

Category of Digital Assets / Instruments Regulatory Approach
“Digital Securities”

(e.g., digital/virtual tokens that have the features and characteristics of a Security under the FSMR (such as Shares, Debentures and Units in a Collective Investment Fund)).
Deemed to be Securities pursuant to Paragraph 58(2)(b) of FSMR.

All financial services activities in relation to Digital Securities, such as operating primary / secondary markets, dealing / trading / managing investments in or advising on Digital Securities, are subject to the relevant regulatory requirements under the FSMR.

Market intermediaries and market operators dealing or managing investments in Digital Securities need to be licensed / approved by FSRA as FSP holders (including as Multilateral Trading Facilities), Recognised Investment Exchanges or Recognised Clearing Houses, as applicable.
“Virtual Assets”

(e.g., non-fiat virtual currencies, virtual asset ‘exchange tokens’).
Treated as commodities and, therefore, not deemed Specified Investments under the FSMR.

Market intermediaries (e.g., broker dealers, custodians, asset managers) dealing in or managing Virtual Assets, and Multilateral Trading Facilities using Virtual Assets, need to be licensed / approved by FSRA. Only activities in Accepted Virtual Assets will be permitted.

Capital formation activities are not provided for under the Virtual Asset Framework, and such activities are not envisaged under the Market Rules (MKT).
Derivatives and Collective Investment Funds of Virtual Assets, Digital Securities and Utility Tokens Regulated as Specified Investments under the FSMR.

Market intermediaries and market operators dealing in such Derivatives and Collective Investment Funds will need to be licensed / approved by FSRA as FSP holders, Recognised Investment Exchanges or Recognised Clearing Houses, as applicable.
“Utility Tokens”

(e.g., tokens which can be redeemed for access to a specific product or service, typically provided using a DLT platform, do not exhibit the features and characteristics of a regulated investment / instrument under the FSMR).
Treated as commodities and, therefore, not deemed Specified Investments under the FSMR.

Unless such Utility Tokens are caught as Accepted Virtual Assets, spot trading and transactions in Utility Tokens do not constitute Regulated Activities, activities envisaged under a Recognition Order (e.g., those of a Recognised Investment Exchange or Recognised Clearing House), or activities envisaged under MKT.
“Fiat Tokens”

(e.g. stablecoins whose value are fully backed by underlying fiat currencies)
Treated as a form of digital representation of Fiat Currency.

Where used as a payment instrument for the purposes of Money Transmission as defined under the FSMR, the activity will be licensed and regulated as Providing Money Services.

5.2 A schematic representation of the FSRA’s regulatory ambit under the FSMR is shown within the blue dotted box.