The Web3 industry faces new regulatory challenges in Singapore

As a financial center in Asia, Singapore has long been the preferred destination for global Web3 entrepreneurs and crypto asset service providers, thanks to its favorable tax policies and well-established legal system. However, the recent issuance of new regulations by the Monetary Authority of Singapore (MAS) regarding digital token services indicates that the country's regulation of the crypto industry is becoming stricter. This policy change has sparked heated discussions within the industry about whether there is a need to withdraw from Singapore.

Evolution of Regulatory Policies

Singapore passed the Financial Services and Markets Act as early as 2022, establishing a regulatory framework for Digital Token Services (DTS), covering businesses such as cryptocurrency and fiat currency exchange, payment transfers, and custody services. At that time, the bill did not strictly limit Singapore-registered entities from providing services to overseas users.

However, in October 2024, the consultation paper released by MAS clearly stated that even Singapore-registered entities providing crypto services to overseas clients would need a DTSP license. In May 2025, MAS further announced the specific timeline for the new regulatory scheme, confirming that it would be officially implemented on June 30, 2025.

Reasons for Policy Adjustment

Singapore's tightening of regulations this time is not a sudden "about-face," but a continuation of its consistent pragmatic style. As one of the earliest jurisdictions to start regulating the crypto industry, Singapore has always adopted a gradual regulatory approach, providing space for industry development while continuously exploring and improving regulatory policies.

In the past few years, although loose policies have attracted a large number of cryptocurrency projects to land, they have also brought some problems:

1. The DTSP license has been abused, with some institutions using it to package themselves or cover up non-compliant operations.
2. The number of telecom fraud cases has increased, with criminals using a base in Singapore to promote fake high-return cryptocurrency products.
3. Illegal activities thrive, with some platforms providing anonymous services for clients, becoming hotbeds for money laundering and terrorist financing.

These irregularities have not only affected the healthy development of the cryptocurrency industry but have also damaged Singapore's international reputation. In the updated "National Anti-Terrorism Financing Strategy" of 2024, MAS raised the terrorism financing risk level of DTS service providers from "medium-low" to "medium-high," reflecting regulators' concerns about industry risks.

Impact of New Regulations

The new regulations have varying impacts on different types of cryptocurrency service providers:

1. Non-licensed institutions that operate locally in Singapore but serve overseas clients need to apply for a DTSP license as soon as possible.
2. For individual remote workers in Singapore, if they are working for a company registered overseas, they may not be affected; however, if they are providing services as an individual, they may need to apply for a license.
3. For institutions that are registered only in Singapore but actually operate overseas, the impact may be smaller, but caution is still needed regarding the MAS's investigation into the actual place of operation.
4. Institutions providing services to local customers in Singapore have long needed to operate with a license, and the new regulations mainly close the loopholes in cross-border services.

Coping Strategies

In light of the upcoming new regulations, Web3 institutions and practitioners can adopt the following strategies:

1. Clarify your own business model and assess whether you need to apply for a license.
2. If you decide to stay in Singapore for development, you should start preparing for the DTSP license application as soon as possible.
3. If compliance costs are too high, consider relocating the business to other regions with more favorable regulations.

Conclusion

Singapore's tightening of regulatory policies is not aimed at driving the cryptocurrency industry away, but rather hopes to raise the threshold to eliminate high-risk small platforms, leaving behind strong, compliant institutions while attracting traditional financial institutions and users into the Web3 space. For powerful large institutions, this could be an opportunity that helps attract more capital into the cryptocurrency market. For smaller teams, timely adjustment of strategies and finding the right positioning can also lead to development opportunities in the new regulatory environment.