Detailed explanation of Singapore's new crypto regulations: Why is it so strict? Who will be driven away? Will it trigger a major retreat?

Author: @agintender, @Johnny_nkc, @alexzuo4

Compiled by: Wu Shuo Blockchain

This article is for general information reference only and does not constitute any form of legal opinions, investment advice or other professional advice. Before taking any action based on this material, the user shall, on his own or entrust a lawyer with professional qualifications to conduct independent review and confirmation.

1. Introduction

On June 30, 2025, the Monetary Authority of Singapore (MAS) officially implemented new regulations on digital token service providers (DTSP), marking the official implementation of this crypto asset supervision system proposed in 2022 and has been brewing for three years. The implementation of the new regulations has caused some panic among community practitioners. This move not only affects Web3 projects operating locally in Singapore, but is also seen as a key event that may reshape the entire Asian crypto industry landscape. A large number of non-licensed institutions may be kicked out of Singapore, and a small number of licensed institutions such as Coinbase OKX Matrixport HashKey Amber will receive more dividends. Hong Kong, Dubai, Tokyo, Kuala Lumpur, Bangkok and other people will undertake these retreating crowds.

**2. Policy background: The "three-year preparation period" has not

attracted enough attention**

Singapore's regulatory changes in the crypto industry did not happen overnight, but were planned for several years. Although the new regulations are generally regarded as "cliff-like supervision" by the outside world, in fact, MAS has passed the Payment Services Act since 2020 to include digital payment tokens (DPTs, i.e. cryptocurrencies) in supervision, and companies that need to provide local crypto exchange and other services to apply for licenses. Since then, the Monetary Authority of Singapore (MAS) has realized that there is still room for regulatory arbitrage: some crypto companies have set up strongholds in Singapore but only serve overseas customers to evade local license requirements. To plug this loophole and comply with the standards of the Financial Action Task Force (FATF), Singapore adopted the Financial Services and Markets Act (FSMA) in April 2022, with Part 9 specifically introducing a licensing system for digital token service providers (DTSPs). After the law was passed, MAS did not immediately strictly enforce it, but reserved sufficient buffer time, and the new regulations were planned to be officially implemented in 2025. MAS clearly stated in the guide that there will be no transition periods available.

In other words, from the time of law to the entry into force, Singapore has given the industry a nearly three-year adjustment period. Therefore, the new regulations announced by MAS recently are not "cliff-like" surprise attacks, but rather regulatory paths set many years ago. However, the Asian crypto circle was still shocked by the fact that MAS once again emphasized the hard deadline on June 30 and the absence of any buffer period when it released its final regulatory response document on May 30, 2025. Some practitioners had previously hoped that the regulatory association would be open to the Internet, but the facts proved that MAS's execution attitude was very firm, and they only regarded the past few years as a window period for the operators to adjust themselves. In general, Singapore's DTSP license system has been implemented after long-term planning and public consultation (such as the consulting report in late 2024), and is not a sudden turn of "one-size-fits-all". The formal bill was issued in 2022, and after multiple rounds of soliciting opinions, it was finally confirmed to be officially implemented in 2025.

However, due to the lack of attention to policy dynamics in the Chinese community, most practitioners did not feel the pressure of supervision until the eve of implementation, resulting in panic interpretation and "Web3 retreat" public opinion.

III. Interpretation of core terms

1. DTSP definition

DTSP is the full name of the digital token service provider. According to the definition of Article 137 of FSM Act and the content of file 3.10, DTSP includes two types of subjects:

1. Individuals or businesses that have a “business premise” in Singapore;

2. Regardless of whether the actual operation is in Singapore or overseas, as long as it is a Singapore-registered company that provides digital token service service services to overseas customers in Singapore.

2. Scope of application “In or From Singapore”

According to the above definition, whether it is an individual or a company, as long as an individual is engaged in digital token-related business in Singapore, or a company that is registered in Singapore but provides encryption services abroad, it falls under the scope of DTSP supervision. It is worth noting that the source of customers here is no longer important: no matter whether the service target is a local or an overseas customer, as long as the operating entity is related to Singapore, it must be licensed, otherwise it will be illegal operation. For example:

· Core development/operation team is located in Singapore;

· The server or hosting system is located in Singapore;

· The marketing activities are clearly targeted at Singapore customers;

· Receive funds or funds from Singapore users;

That is, you need to apply for a license as long as you provide DTSP-wide services in Singapore or to Singapore users.

3. Broadly defined “Place of business”

MAS has a very loose definition of “place of business”, almost equivalent to any place where business is conducted. The official clearly states that a "business place" can be any place used to conduct business, even temporary or mobile places like roadside stalls. As long as you are in Singapore, whether in a company office, a shared work station, or on a sofa at your own home, as long as you engage in business related to digital tokens (and without a license), it is considered to have a business place in Singapore and operate illegally. This explanation dispels some people's luck - in the past, many practitioners believed that working for overseas projects at home was not a "business place", but MAS obviously did not recognize this way of escape. However, MAS also provides a little flexibility: if the person is a formal employee of an overseas company and works for the company remotely from home, the responsibility is mainly due to the employer, the company needs to be licensed, and the individual does not need to apply separately. The key to this regulation is how to define the identity of the "employee". Is the founder of the entrepreneurial team considered an employee? Where is the stockholder consultant? These gray areas are not yet clear and may require further explanation from MAS through FAQ and other aspects in the future. In any case, the regulatory intention is obvious - to eliminate wandering behavior under the banner of "people in Singapore and serving overseas", even if you work from home, it cannot be an excuse to evade supervision.

4. Covered Digital Token Services

Simply put, as long as it is related to "transactions", it is impossible. Under the supervision of DTSP license, the scope of "digital token services" is extremely wide, covering almost all aspects of the crypto business. According to the FSMA schedule, there are as many as ten related activities, mainly including:

1. Token issuance or arrangement to issue digital tokens (Issuance or Arrangement Issuance)

Any involves creating or issuing digital tokens for others, including IDO, Launchpad, token generation events (TGE), etc. Any service involving the provision or sale of digital tokens is regulated. This not only refers to the project's issuance of tokens directly to the public (similar to ICO), but also includes the act of inducing or urging others to buy/sell tokens. Simply put, whether it is an issuer or an intermediary, as long as it is promoting tokens and raising funds, a license is required.

2. Digital token custody services (Custody Services)

Hold or control customers' digital tokens, including cold wallet and hot wallet services. Whether it is providing a custodial vault, custody wallet, or executing token-related instructions on behalf of customers (such as helping customers operate their token accounts and perform transactions), as long as the service provider has control over the token or its control tools, it is a regulated activity. This means that providing customers with interfaces or systems that securely access their assets is also regulated.

3. Brokerage, Matching and Exchange Services

4. Operation of centralized or decentralized order book and transaction matching services (including OTC and DEX Aggregator).

This covers platforms for buying and selling and redeeming digital tokens, as well as brokerage services for others to match token transactions, such as providing a trading platform interface (UI/UX) to assist buyers and sellers in reaching transactions.

4. Transfer Services

Any service that assists clients in transferring tokens from one wallet or account to another (i.e., participating in transactions as an intermediary or cross-chain bridge transfers also requires taking photos). Including the payment gateway, bridge protocol, and the "valet transfer" function provided by the wallet.

5. Validation and Governance Participation

Participate in node verification on behalf of customers (for example staking in the name of the customer), run the validator node, or participate in on-chain governance voting. or involves the act of collecting income or reward from staking or governance.

6. Supporting managed technical services (Technology Enabling Custody)

Provide the infrastructure or technical support required for hosting services (such as MPC wallet service providers, key hosting, hosting API developers). Although assets are not directly controlled, technology plays a key role in the asset control process.

The above scope shows that DTSP licenses cover almost all services in the life cycle of digital tokens, from issuance, transaction, transfer, to custody and operation, supervision cannot be evaded.

4. What businesses do not require a license?

1. Pure Advisory / Consultancy

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

2. Marketing / Publicity Services

Including community management, advertising placement, brand design, etc. Even if you help a Web3 project to market in Singapore, as long as you do not involve asset circulation, transaction matching or token management, it generally does not involve supervision; but if you arrange to sell/distribute or transfer directly on behalf of your customers, it may trigger regulatory obligations.

5. Severity analysis: Why did MAS turn from lenient to strict

Web3 is not a lawless place. Businesses that deal with transactions/funds must be regulated anywhere. The only difference is that Singapore's policies are more "forward-looking". The severity of the new regulations lies in uncompromising implementation and strict access standards. Behind this is both external event stimulation and reflects MAS's consistent regulatory philosophy:

1. Singapore’s “Everything is required to be a license” culture

Singapore implements detailed license management for any business behavior: mobile vendors must complete regular training and obtain a vendor license; even coffee shops need to apply for a public broadcast license if they want to play background music; if they want to operate a swimming pool after opening a hotel, they must also obtain additional licenses. Singapore’s “crypto-friendly” is not unregulated in the industry. Therefore, the same applies to the crypto industry – it also needs to “test first, then take the job, and review regularly”. Its essence is “registration system” rather than “lack of willingness”. No matter what you do in Singapore, you need to be regulated.

2. Investors and capital security are the "national policy level" background color

The Singapore government is a patriarchal government and pays great attention to the welfare of citizens, especially the management of funds. For example, in order to prevent retirees from having no money to retire in their later years, the Singapore government will even restrict the retirees' provident fund (CPF) deposits until they can be gradually withdrawn until they are 55 years old. At the same time, MAS emphasizes the protection of investors' rights and interests, that is, MAS emphasizes AML/KYC, capital and insurance requirements in its crypto license to ensure that in case of an accident, there will be compensation. Can find the responsible person in time, and there are corresponding mortgages and insurances

3. (Fujianese organized crime) "Fujian Gang" SGD 3 billion SGD money laundering case triggers regulatory red line

The primary reason for the tightening of MAS this time is to prevent cross-border financial crimes and money laundering. Digital token services are often carried out across the Internet, with strong anonymity and fast capital flows, and are more likely to be used by criminals to launder money or fund terrorist activities. Singapore has personally experienced some lessons in recent years, and the biggest influence is the "Fujian Gang" cross-border money laundering case exposed in 2023. The case involved 10 foreigners from Fujian and other places in China. They laundered money by opening companies and bank accounts in Singapore, with the amount involved reaching S$3 billion, which is the largest money laundering case in Singapore's history. The bad nature of the incident even had some public opinion impact on the Singapore election.

MAS is not afraid of the destruction of Singapore's goodwill by fraud platforms. The Singapore government has rich experience and means of dealing with such incidents. Through Singapore's IAL list (https://mas.gov.sg/investor-alert-list), it can be noted that what the Singapore government is really afraid of is the diplomatic crisis caused by the inflow or outflow of illegal funds and its status as a funding reservoir in Asia.

4. The license "strict entry and strict management" comes from the "disenchantment" of review practice

MAS's toughness is also reflected in strict access standards. According to the guidelines, MAS said it would “only in rare cases” consider issuing a DTSP license and gave nearly harsh approval conditions:

1. Applicants must prove that their business model is economically justified and have sufficient reasons to operate in Singapore without serving the local market (in other words, MAS must convince you why they only do overseas business).

2. Applicants need to reassure MAS that the way it operates will not arouse regulatory concerns and that they have obtained regulatory licenses or are regulated in all foreign jurisdictions in which they provide services, complying with international regulatory standards (such as those of the Financial Stability Commission, IOSCO and FATF). That is to say, companies must be legal and compliant in every client country, which is almost impossible for many new projects.

3. MAS also emphasizes that the applicant's organizational structure and compliance capabilities cannot disturb supervision, such as the company has sound corporate governance and sufficient manpower and financial resources to fulfill its regulatory obligations.

Therefore, after the application opening in 2021, more than 500 institutions sprinted for licenses at the peak, but most of them were mediocre, with an application approval rate less than 10%; as of the end of 2024, only 13 obtained major DPT licenses, and the total number of license holders increased from 16 to 29. In addition, the MAS regulatory staff was tight, and approval was tighter.

5. Web3 does not bring "precipitation" economic benefits to Singapore

The crypto industry has been surging into Singapore, but many projects have low registered capital and rent luxury offices but do not pay taxes locally; the funds are not kept in local banks and the continuous consumption of funds has pushed up housing prices, wages and car ownership costs, leading to deterioration of social evaluation. Local voters do not buy it, so the government naturally has no intention of "repaying it".

**6. Industry impact assessment: Who will be impacted and will Web3

"great retreat"?**

1. Affected groups:

Individual practitioners: such as independent developers, crypto project consultants, market makers, miners, KOLs (self-media people), community operators, project founders, business development, etc. In the past, these individuals did not need permission to work in Web3 in Singapore, but under the new regulations, everyone may have a sword hanging over their heads. For example, independent developers write smart contracts for overseas blockchain projects, consultants provide solutions for token issuance, and KOL writes token analysis. These activities are theoretically "providing digital token services."

Unlicensed institutions: such as crypto exchanges (whether centralized CEX or decentralized DEX) that have not yet obtained a PSA license, DeFi project team, NFT trading platform, crypto wallet provider, cross-border payment network, and various blockchain startups. If these institutions are in Singapore or registered in companies without any license, they will be at the risk of business disruption. Especially some entrepreneurial projects that have been rooted in Singapore and focused on overseas markets in the past, if they do not meet the application conditions, they are equivalent to being sentenced to "death reprieve" and will not be able to continue operating in Singapore. According to the new regulations, they must shut down related businesses by June 30 at the latest, otherwise they will be illegal operations.

2. Exemption group:

Institutions licensed or exempted under PSA/SFA/FAA do not need to apply for a DTSP license under FSMA, but they need to implement additional obligations of FSMA.

Typical examples:

Custodian: If you have licensed/waived under the PSA, you will be exempted from getting a DTSP license again even when facing overseas customers. However, additional regulatory obligations of FSMA to technology, audit, AML/CFT are required.

FSMA Additional Compliance Checklist:

1. Technical risk management (TRM): Architecture, backup, penetration testing, and third-party services must comply with the best practices of the industry.

2. Annual independent audit report: It must cover the two dimensions of financial + system control and submit within the specified time limit.

3. Higher AML/CFT requirements: Strictly require KYC, transaction monitoring and suspicious reporting obligations.

4. Major security incidents must be reported within 1 hour: data leakage, private key loss, continuous shutdown, etc. must be reported immediately.

5. High-value cash transactions are prohibited: Single cash payments of ≥ S$20,000 are completely banned.

Singapore's formal implementation of the DTSP license system marks the end of the regulatory arbitrage era and enters a new stage. With the general trend of stricter global regulation, major jurisdictions are gradually filling in regulatory shortcomings in crypto activities, and Singapore is just one of the more radical examples. "Setting up in Singapore and providing services abroad" This model, which was often used in the past, is now being included in supervision with one-size-fits-all approach, undoubtedly sending a clear signal to the industry: the future development of Web3 must be based on legal and compliance, and try to integrate the regulatory authority scattered under PSA/SFA/FAA to eliminate the "gray track", and the focus of supervision has shifted from "whether to license" to "whether to comply." Regulation on stablecoins is also being upgraded simultaneously.

1. Single Currency Stable Coin (SCS): implemented in an independent framework.

2. Other stablecoins: continue to be regarded as DPT and still belong to PSA; if they act as the underlying asset of derivatives, they may fall under SFA supervision.

There will be fewer and fewer gray areas outside of regulation. Compliance operations will become the mainstream, and the past era of taking advantage of different jurisdictions to "take loopholes" is over. If Asian crypto entrepreneurs are still keen on finding regulatory depressions in 2018-2021, then after 2025, most of the companies that can gain a foothold are willing to embrace regulatory and have compliance capabilities. Major financial centers in the region are also competing to introduce clear regulatory frameworks. Rather than saying that companies are "escape" a certain place, they are looking for a regulatory environment that best suits their own business.

7. Two self-test questions for the operator

1. Have I been licensed or exempted within the PSA/SFA system?

2. Do I provide any DT services to overseas customers?

If the answer to "Yes" in question 1, no new license is required, but the compliance upgrade is immediately initiated.

If you answer "No" in question 1, you must be licensed or closed before June 30.

The supervision bolts of MAS will only tighten the tighter the more they are — don’t wait for the last day to act. Licensed institutions should regard "compliance upgrade" as a normalized project; if a team that has not yet been licensed does not have a complete set of compliance chips, it should decide whether to apply, merge, or evacuate as soon as possible. This tough measure of not setting up a transition period and requiring violators to stop their business immediately is also sending a signal to the market: Singapore will not be a safe haven for uncontrolled crypto business. Even though it was regarded as a "crypto-friendly" place in the past few years, it is never allowed to take advantage of loopholes now. MAS's move shows that Singapore's crypto regulatory environment has tightened significantly, and many local companies either spend high costs to win cards or can only reorganize their businesses and exit overseas markets. We would rather bear the cost of some companies losing in the short term than erode Singapore's international reputation and financial security.

8. Indirect benefits of surrounding areas

Singapore's move may indirectly benefit other regions and prompt new division of labor and migration in the Asian crypto territory. As another crypto center in Asia, Hong Kong has vigorously promoted the legalization of virtual assets and the construction of a regulatory framework in recent years. As Singapore tightens, Hong Kong is actively taking over the squeezed crypto business. Hong Kong Legislative Council member and member of the National Committee of the Chinese People's Political Consultative Conference, Wu Jiezhuang tweeted that Singapore had earlier released the "Guidelines on Licensing for Digital Token Service Providers" to have new policies for related companies, institutions and personnel engaged in virtual assets. Since Hong Kong issued the virtual asset declaration in 2022, it welcomed the industry to develop in Hong Kong. According to informal statistics, thousands of Web3 companies have been launched in Hong Kong. Companies engaged in related industries in Singapore are welcome to move their headquarters and teams to Hong Kong, and are willing to provide policy and implementation assistance. Intent to build Hong Kong into Asia's leading crypto hub.