Singapore has been one of the favorable hubs for digital asset service providers and Web3 companies due to its supportive and relaxed crypto regulations. For years, crypto firms have trooped here to establish their presence in Asia, nicknaming the country “Crypto Capital of Asia.” However, things are changing, as Singapore is gradually switching from a country supporting crypto innovation to a “risk prevention and control approach.”
From a policymaker’s perspective, the approach will filter out the bad players and retain only companies focused on changing the course of crypto innovation. But the users think differently – that this new approach will “kill off” Web3 and blockchain innovation. Are they right to panic? Is Singapore right to change its course of regulatory approach? Let’s find out.
The Conservative Singapore: Becoming the Crypto Hub of Asia
Singapore quickly emerged as a leader in blockchain adoption, thanks to several factors, such as progressive regulations, proximity to growing markets, and solid financial infrastructure. For instance, Singapore is close to China, where crypto-trading has been totally banned. This made Singapore an attractive spot for fleeing crypto firms. Huobi, a popular crypto exchange based in China, then relocated to Singapore.
The country’s regulatory approach was initially designed to foster innovation and create a conducive environment for blockchain adoption. MAS (Monetary Authority of Singapore) is responsible for regulating cryptocurrencies, and it developed a somewhat relaxed approach to crypto that encouraged Web3 projects to land there, such as Project Orchid. Apart from enforcing the licensing requirements, the MAS has been friendly when it comes to implementing strict rules. As long as you didn’t break the law, you can operate in the country. However, this rare window of opportunity was closed for some justifiable reasons.
The Last Stroke: How Singapore Changed Its Course to Tighter Regulations
Things took a different course after Three Arrows Capital (3AC), a cryptocurrency hedge fund, went bankrupt after the FTX collapse. The hedge fund lost about $200 million of its investment in Luna, which put Singapore’s financial sector under great pressure. The burgeoning sector was shaken by the collapse, forcing the hammer of Singapore regulators, particularly the MAS.
MAS acted quickly, introducing tighter regulations that strengthened supervision of crypto service providers. The regulator introduced a stricter Financial Services and Markets Act (FSMA) and made clearer restrictions on retail investment. It emphasized that speculating on digital currencies wasn’t welcome. By the end of 2023, the regulatory body suspended retail investments. The FSM states that CSPs can’t give retail investors any reward, such as cashbacks and airdrops, nor can they provide functions that encourage risks, such as leverage.
By 2025, non-compliant service providers were told to leave if they were unable to obtain a digital token service provider license by June 30, 2025. Currently, only a few crypto companies, such as Coinbase and Circle, have been approved to stay. About 24 companies, including Cobo and Matrixport, are in exemption status. These companies have passed the AML and risk reviews or have a high degree of compliance. MAS hasn’t spared fund managers. The regulator stipulates that setting up a cryptocurrency fund in Singapore requires qualifications, such as hedging risks, establishing internal risk control processes, and anti-money laundering operating mechanisms. The era of “nice guys” is over in Singapore.
Are Tighter Crypto Regulations a Suppression or Evolution?
Experts think the new wave of regulations is necessary for the growth of the crypto sector. Before, companies only cared about making quick bucks and leaving. Now, if you must stay in Singapore, it’s because you want to do big things in the country. Singapore may no longer be welcoming projects that dwell on speculation, but those with something to offer in the long run.
However, some think that putting a tight leash on Web3, an incompletely developed industry, too early, will slow innovation. We strongly believe that tighter regulations aren’t a suppression; they are fundamental to the maturity of a new industry, such as Web3.
Final Say
Singapore is still an attractive spot for blockchain and Web3 activities. However, it’s no longer business as usual. For teams with technology and long-term planning, Singapore might be the hub for you. According to MAS’s vice president Ho Hern Shin, “We welcome responsible innovation, but we will not tolerate abuse of trust. This implies that crypto regulations will be thoroughly implemented.