By Rick Maeda
Compiled by: TechFlow
summary
While the regulatory environment around Web3 remains unclear in most of the world, Singapore has long been considered a leader in providing a clear framework for various businesses and asset managers in the industry.
In this edition of Presto Research’s Asia Focus series, we analyze various components of the regulatory environment to explore Singapore’s attractiveness for crypto businesses.
We conclude our research with comments from Alex Svanevik and Hassen Naas, CEOs of Singaporean Web3 companies Nansen and Laevitas, who share insights on why Singapore continues to attract crypto companies.
Figure 1: MAS Headquarters
1. Overview
As the digital asset space continues to grow, the city-state of Singapore has become a reference point for crypto businesses and projects looking to establish a foothold in Asia. Singapore’s unique regulatory clarity, technological infrastructure, and strategic location have made it a popular destination for a variety of Web3 entities, including cryptocurrency exchanges, token issuers, blockchain infrastructure providers, and decentralized finance (DeFi) protocols.
This report serves as a comprehensive guide for crypto entrepreneurs, investors, and established players in the industry who wish to use Singapore as a base of operations. Our analysis delves into the key components of Singapore’s crypto ecosystem, analyzing the regulatory landscape as well as the real-world experiences of businesses operating within it.
Singapore's approach to crypto regulation is characterized by a fine balance between fostering innovation and mitigating risk. The Monetary Authority of Singapore (MAS), as the lead financial regulator, has established a clear regulatory framework while remaining flexible to the rapidly changing nature of blockchain technology and digital assets. This report outlines the roles of key agencies, including MAS and the Singapore Fintech Association, and their impact on different areas of the crypto industry.
We explore the licensing requirements and regulatory considerations for a range of crypto-related businesses, including exchanges, payment service providers, token issuers, crypto funds, custodians, over-the-counter (OTC) desks, blockchain infrastructure providers, decentralized finance (DeFi) protocols, NFT platforms, and stablecoin issuers. Our analysis highlights the nuanced approach taken by the Singapore regulator, illustrating how different types of digital assets and services are categorized and regulated under existing frameworks such as the Payment Services Act (PSA) and the Securities and Futures Act (SFA).
To provide a comprehensive perspective of Singapore's crypto ecosystem, this report incorporates the perspectives and experiences of established crypto players in the city-state. Through interviews and case studies, we explore the realities of operating a crypto business in Singapore, including the steps to obtain the necessary licenses, navigating compliance requirements, obtaining banking services, and using Singapore as a bridge to the wider Asian market.
By combining regulatory analysis with practical perspectives, this report aims to equip readers with the knowledge and insights necessary to make informed choices when establishing or expanding a crypto business in Singapore. As the global crypto market continues to change, understanding Singapore’s unique position as a crypto hub at the intersection of innovation and regulation is critical for anyone looking to take advantage of the opportunities this dynamic market has to offer.
2. Regulatory agencies and their functions
Singapore’s robust and forward-looking regulatory framework has played a vital role in attracting Web3 founders, protocols, hedge funds, and venture capital firms. The city-state’s approach to digital assets and blockchain technology is characterized by a balance between innovation and risk management. Two main regulators oversee the crypto and blockchain space:
(1) Monetary Authority of Singapore (MAS)
The Monetary Authority of Singapore is Singapore’s central bank and integrated financial regulator. Its responsibilities include:
Licensing and regulation of Digital Payment Token (DPT) services under the Payment Services Act (PSA).
Regulate crypto derivatives trading on approved exchanges.
Overseeing Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) compliance of crypto businesses.
Issue guidelines on digital token issuance and digital payment token services.
MAS has been actively engaging with the industry and regularly updates its regulatory framework to address emerging risks and opportunities in the Web3 space.
(2) Accounting and Corporate Regulatory Authority (ACRA)
ACRA, while not specifically targeting Web3, is still relevant in terms of entity formation and corporate compliance:
Overseeing the registration and regulation of business entities in Singapore
Ensure compliance with corporate governance standards
Maintain company registers, including companies in the Web3 space
(3) Other relevant organizations
Singapore FinTech Association: Although not a regulatory body, the Singapore FinTech Association plays an important role in the ecosystem:
Acting as a bridge between industry and regulators
Promote Singapore as a FinTech hub and foster innovation
Build a cooperation platform between traditional finance and Web3 companies
Providing educational resources and networking events for blockchain and crypto startups
The interaction between these entities creates a comprehensive ecosystem that supports Web3 innovation while maintaining Singapore's reputation for regulatory transparency and financial stability. This balanced approach makes Singapore a jurisdiction of choice for Web3 founders and businesses.
Figure 2: Presto Labs’ Singapore office Source: Presto Labs
3. Rules and license types required for various crypto businesses
There are a variety of licensing requirements for entities involved in the Web3/cryptocurrency industry — we’ll explore some types of businesses and their associated licenses below.
(1) Payment service providers (including digital payment token exchanges):
These businesses are governed by the Payment Services Act (PSA) and require a license from MAS. There are two relevant licenses:
Standard Payment Institution licence (SPI): For smaller operations.
Major Payment Institution licence (MPI): Applicable to larger operations that handle higher transaction volumes. Currently, 28 entities hold MPI in the digital payment token services business category, including companies such as Blockchain.com, Circle, Coinbase, etc.
Both licenses require compliance with Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) regulations, risk management measures and customer protection measures.
(2) Token Issuer
The regulatory strategy depends on the token type:
Security tokens: regulated by the Securities and Futures Act (SFA) and require a Capital Markets Services (CMS) license.
“Utility” tokens: may not require a specific license, but issuers should consider whether there are other obligations, such as the Payment Services Act (PSA) if their token is a digital payment token.
(3) Crypto Funds
Depending on their structure and operations, they may have to obtain a Capital Markets Services (CMS) license to conduct fund management.
(4) Cryptocurrency Custodian
Providing custodial services for digital payment tokens requires a Payment Services Act (PSA) license.
MAS guidelines on keeping digital assets safe must be followed.
(5) OTC Trading Desk
Depending on the products traded, a Capital Markets Services (CMS) license may be required to trade capital markets products, or a Payment Services Act (PSA) license to provide digital payment token services.
Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) regulations must be followed.
(6) Blockchain infrastructure providers
Usually no specific license is required unless they are engaged in regulated activities.
Relevant business laws must be observed.
(7) DeFi Protocol
Currently operating in a regulatory grey area.
(8) NFT Platform
A license may be required depending on the nature of the NFTs being traded (for example, if the NFTs are considered securities) or whether the platform has on- and off-ramps for fiat currency or digital payment tokens (DPTs).
If financial transactions are involved, Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) regulations must be followed.
(9) Stablecoin issuers
Regulated under the stablecoin regulatory framework implemented by the Monetary Authority of Singapore (MAS) in August 2023.
Single-currency stablecoins (SCS) pegged to the SGD or a G10 currency issued in Singapore will be subject to MAS’s stablecoin regulatory regime. Other stablecoins will continue to be subject to the existing Payment Services Act (PSA) regulatory regime.
Under MAS’s stablecoin regulatory regime, SCS issuers must comply with specific reserve backing, redemption and disclosure requirements.
Other key considerations
All entities must be registered with the Singapore Registrar of Companies (ACRA) and comply with relevant corporate regulations.
Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) compliance is mandatory in all categories.
Foreign entities may need to set up a local presence to obtain a license.
The regulatory environment is constantly evolving, with MAS regularly updating guidelines and introducing new frameworks. This overview provides a snapshot of the current regulatory environment but does not constitute legal advice. Given the rapid developments in the crypto space, it is critical that businesses communicate directly with MAS and/or seek the assistance of legal counsel to ensure compliance with the latest requirements.
4. Beyond regulation: Why Singapore remains attractive in the Web3 space
As explored in the previous sections, the regulatory environment is relatively well-established, providing clear guidelines for a wide range of crypto industry players. But Singapore’s advantages extend beyond that: its long-standing reputation as an expatriate hub, its world-class education system, the country’s safety, its family-friendly infrastructure, and its strategic location are all non-crypto factors that make the city-state an ideal base for founders. We’ll hear from two founders about their decision to set up their company in Singapore.
Alex Svanevik, Nansen
Nansen is a leading on-chain analytics company headquartered in Singapore. Co-founder and CEO Alex Svanevik recounted why he chose to set up the company in Singapore:
Singapore is where the East meets the West, where the private sector meets the public sector, and where finance meets technology. It is one of the few countries in the world that has been operating in "founder mode" for decades (until relatively recently) - led by Lee Kuan Yew. Today, it is still governed by the most capable government in the world. For these reasons, I think it is an ideal place to do business.
This philosophy of embracing global talent has been a cornerstone of Singapore’s economic strategy, significantly increasing its attractiveness to entrepreneurs and businesses, including those in the Web3 space.
Singapore’s appeal as a business hub is more than just anecdotal. Data from the Accounting and Corporate Regulatory Authority (ACRA) shows steady growth in company registrations (Figure 3), while data from the Ministry of Manpower (MoM) shows a rebound in employment pass (EP) growth post-pandemic (Figure 4):
Figure 3: The number of registered businesses in Singapore continues to grow Source: ACRA data from data.gov.sg
Figure 4: Despite a drop in EP numbers during the COVID-19 pandemic, the rebound has been strong Source: Ministry of Manpower
Hassen Naas, Lightness
Laevitas is a quantitative analysis firm specializing in crypto derivatives. As founder and CEO, Hassen offers unique insights as he relocated the company’s headquarters to Singapore.
The decision to relocate a company’s headquarters is not an easy one, especially for companies in the Web3 space, as the industry is often viewed with a certain amount of skepticism in many jurisdictions. I believe this self-reinforcing dynamic continues to strengthen Singapore’s position as a startup tech (and now Web3) hub: companies move here for clear regulations, great living conditions, a thriving financial and tech sectors, a high-quality talent pool, and taxation, which in turn encourages regulators and the government to provide clearer regulatory and business frameworks. This in turn incentivizes more companies to locate in Singapore, which in turn encourages regulators to make further improvements.
Singapore has a large network of businesses and funds, both crypto and traditional, and we have experienced all the expected benefits and more since we relocated here. With many new developments in the pipeline, such as alert systems for market structure changes, order book imbalances, and Time Weighted Average Price (TWAP), we are excited to proudly continue to operate in Singapore.
Not surprisingly, the supportive regulatory environment Hassen cited has led to high cryptocurrency adoption rates. According to a recent report by investment immigration consultancy Henley & Partners, Singapore ranks first in global cryptocurrency adoption (Figure 5). Henley highlighted a strong regulatory environment, innovation and technology, and a favorable regulatory environment as key factors that put the city-state at the top of the 2024 list.
Figure 5: Singapore leads in overall cryptocurrency adoption Source: Henley & Partners
5. Conclusion
Singapore’s emergence as Asia’s leading cryptocurrency hub is no accident. The city-state has carefully cultivated an environment that balances innovation and regulation, creating conditions for Web3 businesses to thrive. The clear regulatory framework provided by the Monetary Authority of Singapore (MAS), coupled with Singapore’s strategic location, world-class infrastructure, and pro-business policies, continue to attract founders and companies from around the world.
Singapore’s flexible regulatory approach will help it maintain its competitive edge as the crypto industry grows. Testimonials from industry leaders such as Alex Svanevik and Hassen Naas highlight the tangible benefits of operating in this ecosystem. While challenges remain, particularly in emerging areas such as decentralized finance (DeFi), Singapore’s strong track record suggests it will continue to refine its approach, balancing innovation with prudent risk management.
For entrepreneurs and established industry players, Singapore offers a unique combination of Eastern and Western influences, financial acumen, and technological capabilities. As the global cryptocurrency landscape continues to change, Singapore’s role as a beacon of stability and innovation in the Web3 space looks set to become even more important.
