Detailed Explanation of Singapore's New Cryptocurrency Regulations: Why So Strict? Who Will Be Driven Away? Will It Trigger a Major Exodus?

Authors: @agintender, @Johnny_nkc, @alexzuo4

Compiled by: Wu Says Blockchain

This article is for general informational reference only and does not constitute any form of legal opinion, investment advice, or other professional advice. Users should conduct independent reviews and confirmations with a qualified lawyer before taking any action based on this material.

1. Introduction

On June 30, 2025, the Monetary Authority of Singapore (MAS) officially implemented new regulations for Digital Token Service Providers (DTSP), marking the formal establishment of a regulatory framework for crypto assets that has been in development since its proposal in 2022. The execution of these new regulations has caused some panic among community practitioners, as this move not only affects Web3 projects operating locally in Singapore but is also seen as a key event that could reshape the entire Asian crypto industry landscape. Many unlicensed institutions may be driven out of Singapore, while a few licensed institutions such as Coinbase, OKX, Matrixport, HashKey, and Amber will gain more benefits. Places like Hong Kong, Dubai, Tokyo, Kuala Lumpur, and Bangkok will likely accommodate these retreating entities.

2. Policy Background: "Three-Year Preparation Period" Not Taken Seriously Enough

The regulatory changes in Singapore regarding the crypto industry did not happen overnight but were the result of several years of planning. Although the new regulations are widely viewed as "cliff-like regulation," in reality, MAS has been regulating digital payment tokens (DPT, i.e., cryptocurrencies) since 2020 through the Payment Services Act, requiring local businesses providing crypto exchange services to apply for licenses. Subsequently, MAS realized that there was still room for regulatory arbitrage: some crypto companies established bases in Singapore but only served overseas clients to evade local licensing requirements. To close this loophole and comply with the Financial Action Task Force (FATF) standards, Singapore passed the Financial Services and Markets Act (FSMA) in April 2022, which specifically introduced a licensing system for Digital Token Service Providers (DTSP) in Section 9. After the law was passed, MAS did not immediately enforce it strictly but allowed ample buffer time, planning to officially implement the new regulations in 2025. MAS had clearly stated in its guidelines that no transition period would be provided.

In other words, from the formulation of the law to its effective date, Singapore has given the industry nearly three years to adjust. Therefore, the recent announcement of new regulations by MAS is not a "cliff-like" sudden attack but rather a regulatory path set years ago. However, when MAS reiterated the hard deadline of June 30 with no buffer period in its final regulatory response document released on May 30, 2025, it still shocked the Asian crypto community. Some practitioners had hoped that the regulations would be lenient, but it has been proven that MAS's enforcement attitude is very resolute, viewing the past few years as a window for practitioners to adjust themselves. Overall, the DTSP licensing system in Singapore was established after long-term brewing and public consultation (e.g., the consultation report in late 2024) and was not a sudden "one-size-fits-all" shift. The formal bill was released in 2022, and after multiple rounds of soliciting opinions, it was finally confirmed to be implemented in 2025.

However, due to the lack of attention from the Chinese community to policy dynamics, most practitioners only felt regulatory pressure on the eve of implementation, leading to panic interpretations and the "Web3 mass exodus" narrative.

3. Interpretation of Core Provisions

1. Definition of DTSP

DTSP stands for Digital Token Service Provider. According to the definition in Section 137 of the FSM Act and the content of Document 3.10, DTSP includes two types of entities:

1) Individuals or businesses operating with a "place of business" in Singapore;

2) Singapore-registered companies providing digital token services to clients outside of Singapore, regardless of whether their actual operations are in Singapore or overseas.

2. Scope of Application: "In or From Singapore"

According to the above definition, whether an individual or a business, as long as the entity is engaged in digital token-related business in Singapore, or a company registered in Singapore provides crypto services to overseas clients, it falls under the regulatory scope of DTSP. It is worth noting that the source of clients is no longer important: regardless of whether the service targets locals or overseas clients, as long as the operating entity has a connection to Singapore, it must be licensed; otherwise, it is operating illegally. For example:

· The core development/operation team is located in Singapore;

· Servers or hosting systems are based in Singapore;

· Marketing activities are explicitly aimed at Singaporean clients;

· Receiving funds or assets from Singaporean users;

Thus, any service provided in Singapore or to Singaporean users within the scope of DTSP requires a license.

3. Broad Definition of "Place of Business"

MAS has a very broad definition of "place of business," almost equivalent to any location where business is conducted. The official statement clarifies that a "place of business" can be any location used for conducting business, including temporary or mobile locations like street stalls. As long as a person is within Singapore, whether in a company office, shared workspace, or on their own couch at home, if they are engaged in digital token-related business (and without a license), they are considered to have a place of business in Singapore and are operating illegally. This interpretation dispels the delusions of some individuals—many practitioners previously believed that working remotely from home for overseas projects did not count as a "place of business," but MAS clearly does not accept this evasion. However, MAS does provide some flexibility: if the individual is a formal employee of an overseas company working remotely from home, then the responsibility primarily lies with the employer, and the company must be licensed, while the individual does not need to apply separately. The key to this provision lies in how the "employee" status is defined: does the founder of a startup count as an employee? What about a shareholder consultant? These gray areas are currently unclear and may require further clarification from MAS through FAQs or other means. Regardless, the regulatory intent is clear—preventing behaviors that exploit the "being in Singapore, serving overseas" narrative; even working from home cannot be an excuse to evade regulation.

4. Scope of Covered Digital Token Services

Simply put, anything related to "trading" is not allowed. Under the DTSP licensing regulation, the scope of "digital token services" is extremely broad, almost encompassing all aspects of crypto business. According to the FSMA annex, there are as many as ten categories of relevant activities, mainly including:

1) Token issuance or arranging the issuance of digital tokens (Issuance or Arranging Issuance)

Any involvement in creating or issuing digital tokens for others, including IDOs, Launchpads, Token Generation Events (TGEs), etc. Any service involving the provision or sale of digital tokens falls under regulation. This not only refers to projects issuing tokens directly to the public (similar to ICOs) but also includes inducing or prompting others to buy/sell tokens. In simple terms, whether as an issuer or intermediary, if you are promoting tokens or raising funds, you need a license.

2) Digital token custody services (Custody Services)

Holding or controlling clients' digital tokens, including cold wallet and hot wallet services. Whether providing custody vaults, custody wallets, or executing token-related instructions on behalf of clients (e.g., helping clients operate their token accounts, executing transactions), as long as the service provider has control over the tokens or their control tools, it falls under regulated activities. This means that providing clients with secure access to their assets through interfaces or systems is also subject to regulation.

3) Brokerage, matching, and trading arrangement services (Brokerage / Matching / Exchange Services)

Operating centralized or decentralized order books, trading matching services (including OTC, DEX Aggregator).

This covers platforms for buying, selling, and exchanging digital tokens, as well as brokerage services that facilitate token trading for others, such as providing trading platform interfaces (UI/UX) to assist buyers and sellers in completing transactions.

4) Transfer or payment services (Transfer Services)

Any service that assists clients in transferring tokens from one wallet or account to another (i.e., participating as an intermediary in transactions or cross-chain bridge transfers also requires licensing). This includes payment gateways, bridging protocols, and "client transfer" functions provided by wallets.

5) Validation and governance services (Validation / Governance Participation)

Representing clients in node validation (e.g., staking on behalf of clients), running validator nodes, or participating in on-chain governance voting. This also involves receiving rewards or compensation from staking or governance activities.

6) Technology enabling custody services (Technology Enabling Custody)

Providing the infrastructure or technical support necessary for custody services (e.g., MPC wallet service providers, key custody, custody API developers). Although not directly controlling assets, technology plays a key role in asset control processes and is included.

The above scope shows that the DTSP license almost covers all services in the lifecycle of digital tokens, from issuance, trading, and transfer to custody and operation, all of which cannot evade regulation.

4. What Businesses Do Not Need a License?

1. Pure technical consulting (Pure Advisory / Consultancy)

For example: project design, token economic model consulting, legal structure advice, product design guidance, etc. As long as you do not participate in the actual custody of assets, issuance on behalf of others, or executing transactions, you will not be considered a DTSP.

2. Marketing and publicity services (Marketing / Publicity Services)

Including community management, advertising, brand design, etc. Even if you help a Web3 project promote its market in Singapore, as long as you do not involve asset circulation, transaction matching, or token management, you generally will not be subject to regulation; however, if you directly arrange token sales/distributions or transfers on behalf of clients, it may trigger regulatory obligations.

5. Severity Analysis: Why MAS Shifted from Lenient to Strict

Web3 is not outside the law; businesses involving transactions/funds must be regulated anywhere, with the only difference being that Singapore's policies are somewhat more "forward-looking." The strictness of the new regulations lies in uncompromising enforcement and stringent entry standards. This is driven by external events and reflects MAS's consistent regulatory philosophy:

1. Singapore's "Everything Requires a License" Legal Culture

Singapore implements meticulous licensing management for any commercial activity: street vendors must complete regular training and obtain a vendor license; even coffee shops must apply for public broadcast licenses to play background music; if a hotel wants to operate a swimming pool after opening, it must obtain additional licenses. Singapore's "crypto-friendly" stance does not mean no regulation for the industry; thus, the crypto industry must also "obtain a license before operating and undergo regular reviews," which is essentially a "registration system" rather than a "laissez-faire" approach. In Singapore, whatever you do must be regulated.

2. Investor and Fund Safety as a "National Policy" Priority

The Singapore government acts as a parental figure, paying great attention to the welfare of its citizens, especially in fund management. For instance, to prevent retirees from running out of money in their old age, the government even restricts retirees' Central Provident Fund (CPF) withdrawals until they reach 55 years old. At the same time, MAS emphasizes the protection of investors' rights, highlighting AML/KYC, capital, and insurance requirements in crypto licenses to ensure accountability and compensation in case of incidents. It is crucial to be able to identify responsible parties promptly, with corresponding deposits and insurance in place.

3. The "Fujian Gang" 3 Billion SGD Money Laundering Case Triggered Regulatory Red Lines

The tightening by MAS is primarily aimed at preventing cross-border financial crimes and money laundering. Digital token services often operate across borders via the internet, characterized by strong anonymity and rapid fund movement, making them more susceptible to exploitation by criminals for money laundering or funding terrorism. Singapore has experienced some lessons in recent years, the most significant being the "Fujian Gang" cross-border money laundering case exposed in 2023. This case involved ten foreign nationals from Fujian, China, who laundered money through companies and bank accounts in Singapore, with an amount as high as 3 billion SGD, making it the largest money laundering case in Singapore's history. The severity of this incident even had some public opinion impact on the recent elections in Singapore.

MAS is not afraid of fraudulent platforms damaging Singapore's reputation; the government has rich experience and means to respond to such events. Through Singapore's IAL list (https://mas.gov.sg/investor-alert-list), it is evident that what the Singapore government truly fears is the inflow or outflow of illicit funds causing diplomatic crises and undermining its position as a financial reservoir in the Asia region.

4. Strict Licensing and Regulation Stem from "De-Mystifying" Review Practices

MAS's firmness is also reflected in its stringent entry standards. According to the guidelines, MAS states that it "will only consider issuing DTSP licenses in very rare cases" and has set forth nearly harsh approval conditions:

1) Applicants must demonstrate that their business model has economic rationality and provide sufficient reasons for operating in Singapore without serving the local market (in other words, MAS must be convinced why they are only doing overseas business).

2) Applicants must assure MAS that their operational methods will not raise regulatory concerns and that they have obtained regulatory licenses or are subject to regulation in all foreign jurisdictions where they provide services, complying with international regulatory standards (e.g., Financial Stability Board, IOSCO, and FATF standards). This means that companies must be legal and compliant in every country where their clients are located, which is nearly an impossible task for many startups.

3) MAS also emphasizes that the applicant's organizational structure and compliance capabilities must not cause regulatory unease, such as having sound corporate governance and sufficient manpower and financial resources to fulfill regulatory obligations.

As a result, after the application opened in 2021, over 500 institutions rushed to obtain licenses at peak times, but most had mediocre qualifications, with an approval rate of less than 10%; by the end of 2024, only 13 had obtained the main DPT license, and the total number of license holders increased from 16 to 29. Coupled with MAS's tight regulatory personnel, the approval process has become even stricter.

5. Web3 Has Not Brought "Depository" Economic Benefits to Singapore

The crypto industry has surged into Singapore, but many projects have low registered capital, renting luxurious offices without paying local taxes; funds do not remain in local banks but continuously consume, driving up housing prices, salaries, and vehicle certificate costs, leading to deteriorating social evaluations. Local voters are not convinced, and the government naturally has no intention of "working hard for nothing."

6. Industry Impact Assessment: Who Will Be Affected, Will Web3 "Mass Exodus"?

1. Affected Groups:

Individual practitioners: such as independent developers, crypto project consultants, market makers, miners, KOLs (content creators), community operators, project founders, business development personnel, etc. In the past, these individuals did not need a license to engage in Web3 work in Singapore, but under the new regulations, everyone may have a sword hanging over their heads. For example, independent developers writing smart contracts for overseas blockchain projects, consultants providing token issuance solutions, and KOLs writing token analyses—all these activities theoretically fall under "providing digital token services."

Unlicensed institutions: such as crypto exchanges (whether centralized CEX or decentralized DEX) that have not yet obtained PSA licenses, DeFi project teams, NFT trading platforms, crypto wallet providers, cross-border payment networks, and various blockchain startups. These institutions, if they have personnel or company registrations in Singapore but lack any licenses, will face the risk of business interruption. Especially for some startups that have previously rooted in Singapore but focused on overseas markets, if they do not meet the application conditions, it is equivalent to being sentenced to "death row," and they will not be able to continue operating in Singapore. According to the new regulations, they must cease relevant operations by June 30 at the latest; otherwise, they will be operating illegally.

2. Exempt Groups:

Institutions that are already licensed or exempted under PSA/SFA/FAA do not need to apply for the DTSP license under FSMA but must fulfill additional obligations under FSMA.

Typical examples:

Custodians: If already licensed/exempted under PSA, even when facing overseas clients, they are exempt from obtaining a DTSP license again. However, they must fulfill additional regulatory obligations under FSMA regarding technology, auditing, and AML/CFT.

FSMA Additional Compliance Checklist:

1) Technology Risk Management (TRM): Architecture, backups, penetration testing, and third-party services must comply with industry best practices.

2) Annual Independent Audit Report: Must cover both financial and system control dimensions and be submitted within the specified timeframe.

3) Higher AML/CFT Requirements: Stricter KYC, transaction monitoring, and suspicious reporting obligations.

4) Major Security Incidents Must Be Reported Within 1 Hour: Data breaches, loss of private keys, continuous downtime, etc., must be reported to MAS immediately.

5) Prohibition of High-Cash Transactions: Cash payments of ≥ 20,000 SGD are completely banned.

The formal implementation of the DTSP licensing system in Singapore marks the end of the era of regulatory arbitrage and the beginning of a new phase. Amid the global trend of tightening regulation, major jurisdictions are gradually filling regulatory gaps for crypto activities, with Singapore being one of the more aggressive examples. The previously exploited model of "establishing in Singapore and providing services overseas" is now uniformly regulated, undoubtedly sending a clear signal to the industry: the future development of Web3 must be based on legality and compliance, attempting to integrate the regulatory powers scattered under PSA/SFA/FAA, eliminating "gray areas," and shifting the regulatory focus from "whether licensed" to "whether compliant." Regulation of stablecoins is also being upgraded simultaneously.

1) Single Currency Stablecoins (SCS): Implemented under an independent framework.

2) Other Stablecoins: Continue to be treated as DPT, still falling under PSA; if acting as underlying assets for derivatives, they may fall under SFA regulation.

The gray areas outside regulation will become increasingly scarce. Compliance will become the mainstream, and the era of exploiting differences in jurisdictions is coming to an end. If from 2018 to 2021, Asian crypto entrepreneurs were keen on finding regulatory havens, after 2025, those that can stand firm will mostly be enterprises willing to embrace regulation and possess compliance capabilities. Major financial centers in the region are also competing to launch clear regulatory frameworks; rather than saying companies are "fleeing" from certain places, it is more accurate to say they are seeking regulatory environments that best fit their business.

7. Two Self-Check Questions for Practitioners

1. Am I already licensed or exempt under the PSA/SFA system?

2. Am I providing any DT services to overseas clients?

If the answer to Question 1 is "Yes," no new license is needed, but immediate compliance upgrades should be initiated.

If the answer to Question 1 is "No," then a license must be obtained or the business must cease operations by June 30.

MAS's regulatory screws will only tighten further—do not wait until the last day to act. Licensed institutions should view "compliance upgrades" as a normalized process; unlicensed teams lacking a full set of compliance resources should decide early whether to apply, merge, or withdraw. The absence of a transition period and the requirement for violators to immediately cease operations send a strong signal to the market: Singapore will not be a safe haven for uncontrolled crypto businesses. Even if it was seen as a "crypto-friendly" place in the past few years, it is now absolutely not allowed to exploit loopholes. MAS's actions indicate that Singapore's crypto regulatory environment has tightened significantly, and many local companies will either incur high costs to obtain licenses or will have to restructure their businesses and exit overseas markets. The government would rather bear the short-term cost of losing some enterprises than allow Singapore's international reputation and financial security to be compromised.

8. Indirect Benefits to Surrounding Regions

Singapore's actions may indirectly benefit other regions, prompting a new division and migration of the Asian crypto landscape. As another crypto hub in Asia, Hong Kong has been actively promoting the legalization and regulatory framework for virtual assets in recent years. Coinciding with Singapore's tightening measures, Hong Kong is actively accommodating the crypto businesses that are being squeezed out. Hong Kong Legislative Council member and National Committee member Wu Jiezhuang tweeted that Singapore recently released the "Guidelines on Licensing for Digital Token Service Providers," which introduces new policies for companies, institutions, and personnel engaged in virtual assets. Since Hong Kong issued its virtual asset declaration in 2022, it has welcomed the industry to develop in the region. According to unofficial statistics, over a thousand Web3 companies have established operations in Hong Kong. It welcomes companies engaged in related industries in Singapore to relocate their headquarters and teams to Hong Kong and is willing to provide policy and landing assistance, aiming to make Hong Kong a leading crypto hub in Asia.