Singapore’s status as a Web3 paradise faces new challenges
Singapore, a financial center known as the "Asian Web3 Paradise", has been the first choice for global crypto asset service providers and Web3 entrepreneurs for many years, thanks to its zero capital gains tax and sound legal system. In October 2024, the Monetary Authority of Singapore (MAS) issued a detailed draft for comments on the new regulations for digital token services, foreshadowing the tightening of regulatory policies; and the new regulations response document issued by MAS on May 30, 2025 has stimulated heated discussions in the crypto industry about whether it needs to "evacuate" Singapore. So where will the crypto asset service providers operating in Singapore, especially those that provide services to overseas customers, go?
The core of the new regulations: supervision is upgraded
As early as 2022, Singapore passed the Financial Services and Markets Act, Chapter 9 of which specifically establishes a regulatory framework for digital token services (DTS), which involves various virtual assets and crypto asset businesses, such as:
- Crypto assets and fiat currency exchange
- Confidential Asset Transfer Payments
- Crypto asset custody services
However, the Financial Services and Markets Act at that time did not strictly restrict the provision of services to overseas users by entities registered in Singapore. Coupled with the tax incentives, a large number of web3 project parties landed in Singapore, radiating services to the world. In October 2024, the regulatory framework was further refined, and MAS clearly stated in the draft for comments that entities registered in Singapore need a DTSP license even if they provide encryption services to overseas customers. With the response to the solicitation of comments issued by MAS in May 2025, a more specific timetable has also emerged: the new regulatory plan will be officially implemented on June 30, 2025. MAS's intention is clear: the days of wild growth are over, and if you want to stay and play, you have to abide by the rules.
Why is Singapore doing this?
You may ask: Hasn't Singapore always been friendly to the crypto industry? Why did it suddenly change its attitude? In fact, this is not a "change of attitude", but a continuation of Singapore's consistent pragmatic style. As one of the earliest jurisdictions to regulate the crypto industry, Singapore's style is to avoid a "one-size-fits-all" strategy, first give the industry a certain amount of space, closely monitor the industry while developing together with the industry, and constantly explore the upgrade and iteration of regulatory policies and methods.
In the past few years, Singapore’s loose policies have successfully attracted a large number of crypto projects, but they have also brought side effects:
1. License Abuse: The DTSP license is a pass for compliance, but some institutions use it to play "edge ball". Some project parties use the license to package themselves, attract investment or cover up non-compliant operations.
2. Telecom fraud: Telemarketing fraud has always been a cancer in the crypto industry. Some criminals, based in Singapore, promote "high-return" crypto products through phone or social media, or induce customers to buy unknown tokens, promote fake "custody services", and then run away with the money.
3. The proliferation of gray and black industries and crimes: Some unlicensed crypto asset trading platforms provide customers with "anonymous" services, which criminals take advantage of to conduct money laundering and terrorist financing activities; other crypto projects disguise funds of unknown origin as legal income, seriously disrupting the financial order.
These chaos not only disrupt the normal development of the encryption industry, but also damage the reputation of the industry and even Singapore; when MAS updated the National Counter-Terrorism Financing Strategy in 2024, it also raised the terrorist financing risk level of DTS service providers from "medium-low" to "medium-high". MAS has realized the necessity of tightening regulatory policies from various phenomena. At this point, the goal of the new regulations is very clear:
1. Eliminate “small and scattered” platforms: Increase compliance costs and force “small platforms” that are easily abused by illegal activities to exit the market;
2. Keep the "big players": encourage institutions with strong financial resources, strong compliance capabilities, and the ability to provide users with safe and stable services to stay;
3. Attract traditional funds: Allow traditional financial institutions and users such as banks and funds to enter the web3 field with greater confidence.
In other words, Singapore does not want to drive away the crypto industry, but wants it to develop sustainably rather than being a "safe haven" for criminals.
How big is the impact on industry players?
If you are a crypto asset service provider, the impact of the new regulations depends on your business model. There are several specific situations:
Scenario 1: An unlicensed institution has a local office in Singapore and serves overseas clients
For example, if you set up a registered entity in Singapore and hire employees to provide crypto asset exchange services to overseas customers, you must quickly apply for the MAS DTSP license after the new regulations come into effect, otherwise your business will have to stop.
Scenario 2: An individual in Singapore works remotely to provide services to overseas clients
If you are a "digital nomad", working remotely and only serving overseas clients, the situation is a little more complicated.
1. Where contracting is with a foreign registered entity, MAS’ current position is that if an individual is an employee of a foreign registered company that provides services outside Singapore, the work performed by the individual as part of his/her employment with the foreign registered company will not trigger a licensing requirement.
2. If it is only in an individual capacity (such as KOL, project consultant, etc.), MAS’s current attitude is: if an individual is located in Singapore and is engaged in the business of providing digital token services to persons outside Singapore (i.e. individuals and non-individuals), the individual needs to apply for a license.
* It should be noted that MAS’s regulations for such scenarios are relatively broad and different cases may have different determinations.
Case 3: The entity is registered in Singapore but actually operates overseas
If a company is just a "company shell" in Singapore but its actual business and service objects are overseas, the new regulations may have little impact.
However, risks cannot be completely ruled out: MAS may trace the actual place of operation. If it is found that there are substantial business activities in Singapore (such as physical offices or servers), a DTSP license must still be held.
Scenario 4: Providing services to local customers in Singapore
This scenario needs no elaboration. Regardless of how the new regulations change, those who provide crypto asset services to Singapore residents have long been required to obtain a license. The new regulations only further close the loopholes in cross-border services.
Compliance advice: three steps to stay on top
Faced with the new regulations that are about to take effect, web3 institutions and practitioners must grasp the key points and take action. Here are three practical suggestions to help you cope with the changes:
1. Understand the business
First, find out which category your business model belongs to and whether a license is required.
2. Prepare your license application in advance
If you decide to stay in Singapore, prepare for the MAS DTS license application as early as possible.
3. Consider migration options
If compliance costs are too high, look elsewhere, such as other countries in Asia or even Europe or the Middle East.
Opportunities and challenges coexist, don't be scared away by new regulations
Singapore's new crypto regulation seems to have put a "tight ring" on the industry, but from another perspective, it is also an opportunity. For large institutions with sufficient strength and budget, compliance may be the only way to attract more funds into the crypto market; and for relatively small institutions and teams, timely adjustment of strategies and accurate positioning can also help them find opportunities for compliance transformation.
