The Web3 Industry Faces New Regulatory Challenges in Singapore

As an important center for Web3 development in Asia, Singapore has attracted numerous cryptocurrency asset service providers and Web3 entrepreneurs over the years with its favorable tax policies and comprehensive legal system. However, with the Singapore Monetary Authority (MAS) releasing a detailed consultation draft of new regulations on digital token services in October 2024, and the response document to the new regulations being published on May 30, 2025, the country's regulatory policies have begun to tighten, sparking heated discussions in the industry about whether there is a need to leave Singapore.

Core Contents of Regulatory Upgrade

Singapore passed the Financial Services and Markets Act in 2022, establishing a regulatory framework for Digital Token Services (DTS). This framework covers various aspects such as the exchange of crypto assets for fiat currency, payment transfers of crypto assets, and custodial services. However, the bill at that time did not strictly prohibit Singapore-registered entities from providing services to overseas users.

In October 2024, MAS clearly stated in the consultation paper that even Singapore-registered entities providing crypto services to overseas clients would need to obtain a DTSP license. The response document from May 2025 further confirmed that the new regulatory scheme would officially take effect on June 30, 2025. This series of measures indicates that Singapore is tightening its regulation of the crypto industry.

Reasons for Singapore Tightening Regulations

Singapore's move is not a sudden shift in attitude, but rather a continuation of its consistent pragmatic style. As one of the earliest regions to regulate the cryptocurrency industry, Singapore has always adopted a strategy of gradual adjustment, continuously improving regulatory policies while allowing space for industry development.

In recent years, Singapore's relatively relaxed policies have successfully attracted a large number of crypto projects, but they have also brought some problems:

1. The DTSP license has been abused, with some institutions using it for improper operations.
2. Telecom fraud activities are increasing, with some criminals conducting scams based in Singapore.
3. Illegal activities breed, such as money laundering and terrorist financing.

These issues have not only disrupted the normal development of the cryptocurrency industry but also damaged Singapore's reputation. In the 2024 update of the "National Anti-Terrorist Financing Strategy," MAS raised the terrorism financing risk level for DTS service providers to "medium-high."

The main objectives of the new regulations include: phasing out non-compliant small platforms, retaining large institutions with strong capabilities and compliance, and attracting traditional financial institutions and users to enter the Web3 space.

Impact of New Regulations on Industry Entities

The impact of the new regulations varies by business model:

1. Non-licensed institutions providing local office services to overseas clients in Singapore must apply for a DTSP license as soon as possible.
2. The situation where individuals provide services remotely for overseas clients in Singapore is relatively complex and may require assessing specific circumstances to determine whether a permit is needed.
3. Entities registered in Singapore but operating overseas may have a minor impact, but potential risks still need to be noted.
4. Institutions providing services to local customers in Singapore have long been required to operate with a license.

Suggestions for Responding to New Regulations

In response to the upcoming new regulations, Web3 institutions and practitioners can take the following steps:

1. Clarify the business model and determine whether a license is required.
2. If you decide to stay in Singapore for development, prepare the MAS DTS license application as early as possible.
3. If compliance costs are too high, consider relocating the business to other regions.

Conclusion

The new crypto regulatory rules in Singapore, while presenting challenges to the industry, also create opportunities. For large institutions with strong capabilities, this could be a chance to attract more funding into the crypto market. For smaller institutions and teams, timely adjustments in strategy and finding the right positioning can also lead to opportunities for compliant transformation. This initiative by Singapore aims to promote the sustainable development of the crypto industry rather than excluding it.