Singapore's Web3 Regulatory Shift: Invisible Players and New Opportunities After the Cleanup

The Monetary Authority of Singapore (MAS) issued a statement on May 30, requiring all unlicensed digital token service providers to cease operations by June 30, or face criminal penalties. This decision has caused a huge stir in the Asian Web3 community.

Once regarded as a "crypto safe haven," Singapore now adopts a tough stance with zero transition period, demanding all unlicensed digital token service providers to withdraw completely. The MAS has expanded the definition of "business premises" to include home sofas, shared desks, and other locations. As long as individuals or institutions engage in digital token-related business within Singapore, regardless of whether the clients are domestic or foreign, they are required to operate under a license; otherwise, it may constitute a crime.

The core of this regulatory storm is the Financial Services and Markets Bill passed in 2022, which provides a regulatory framework for digital token services. In particular, Article 137 of this bill puts an end to Singapore's history as a "regulatory arbitrage paradise" for crypto assets. According to this provision, all individuals or entities with a place of business in Singapore that provide digital token services to overseas users must obtain a DTSP license.

The MAS's definition of "digital token services" almost covers all aspects of digital asset business, including token issuance, custody services, brokerage matching transactions, transfer payment services, verification, and governance services, etc. Institutions without a license must immediately cease overseas operations, and the MAS does not accept "application in progress" status as a basis for legal existence.

The core reason for Singapore's move lies in defending the country's "financial reputation". The MAS emphasized that digital token services have strong cross-border anonymity attributes, making them susceptible to illegal activities such as money laundering and terrorist financing. The FTX collapse resulted in losses for Singapore's sovereign wealth fund, severely impacting Singapore's financial reputation, which also became a direct trigger for tightening policies.

Faced with new regulations, Web3 practitioners in Singapore are rapidly differentiating. Some small teams have expressed that investing significant resources to deal with regulation is almost an unbearable burden, and they do not rule out the possibility of completely relocating from Singapore. Applying for the DTSP license requires an initial capital of 250,000 SGD, a resident compliance officer, the establishment of an independent audit mechanism, etc. This high threshold has deterred many startups.

However, some local industry insiders believe that Singapore's regulatory policies in the Web3 field have not drastically changed in recent years, but rather have clarified and refined the existing framework. The focus of MAS's regulation is on digital payment tokens and tokens with capital market attributes, while utility tokens and governance tokens are currently not at the core of its regulation.

As Singapore tightens regulations, Hong Kong and Dubai almost simultaneously open their arms to crypto enterprises. Hong Kong legislators publicly invite relevant businesses in Singapore to relocate to Hong Kong. Hong Kong has also become the first jurisdiction in the world to establish a comprehensive regulatory framework for fiat-backed stablecoins. Dubai attracts global crypto attention with favorable tax policies and an independent digital asset regulatory authority.

However, choosing a new foothold is not an easy task. The global regulatory trend is becoming increasingly evident, and no region can enjoy the benefits of globalization independently. Web3 and stablecoins are essentially the inevitable result of technological innovation being absorbed by the mainstream financial system.

In this regulatory transformation, stablecoins and the tokenization of real-world assets (RWA) have become the most promising areas for development. The stablecoin market is experiencing explosive growth, with a total market capitalization increasing by over 1100% in five years. RWA is also becoming the next trillion-dollar market, with a total value increase of over 110% within a year.

In the new regulatory environment, successfully licensed institutions are gradually building significant competitive barriers. Currently, only 33 companies have obtained digital payment token licenses in Singapore, including well-known institutions like Coinbase and Circle. Some local institutions, such as MetaComp, have established a complete compliance licensing system and are building the next generation of financial infrastructure through blockchain technology.

MetaComp, as a large payment institution authorized by MAS, not only holds licenses for cross-border payments and DPT business but has also established a comprehensive compliance system covering multiple licenses in payment, securities, custody, derivatives, and more. This localized and fully compliant approach offers significant advantages for local operations and partners looking to operate in Singapore.

In the next decade, as regulatory measures deepen in various countries, compliance capability will become a watershed in the industry. Only those pioneers with upfront licenses, solid payment networks, and RWA issuance structures are expected to define the rules and move steadily forward in the new round of global digital financial order.