Singapore's Web3 Regulatory Shift: From Encouraging Innovation to Risk Management

In recent years, Singapore has been regarded as a hot hub for global virtual currency and Web3 enterprises. Its lenient policies, stable legal system, and open innovation environment have attracted numerous crypto players, making it the "crypto capital of Asia." However, Singapore today is gradually shifting from the early "encouraging innovation" model to a prudent approach focused on "risk prevention."

Early Stage: An Open Attitude Promotes Industry Development

In 2019, Singapore launched the Payment Services Act (PSA), which clarified the legal status of Digital Payment Token (DPT) services, providing a clear licensing pathway for cryptocurrency exchanges and wallet services. The Monetary Authority of Singapore (MAS) actively encourages technological innovation, driving several experimental projects exploring central bank digital currencies and tokenized assets. During this period, Singapore provided a valuable "window period" for Web3 projects, allowing companies to boldly experiment as long as they do not cross compliance boundaries.

Changes After the Industry Collapse

In 2022, Three Arrows Capital collapsed in Singapore, followed by the FTX bankruptcy event, which brought immense pressure to the financial regulators in Singapore. To maintain national credibility, the regulatory authorities acted swiftly. On one hand, they introduced stricter Financial Services and Markets Act (FSM) to strengthen oversight of cryptocurrency service providers; on the other hand, they imposed clear restrictions on retail investors, emphasizing the importance of rational investment.

Restrictions on Retail Investor

At the end of 2023, the regulatory guidelines released by MAS directly put the brakes on retail investors. The new regulations require cryptocurrency service providers not to offer any form of rewards to retail investors, such as cashback, airdrops, or trading subsidies; prohibit the provision of leverage, credit card deposits, and other functions that amplify risks; and even require an assessment of users' risk tolerance and the setting of investment limits based on net asset value. These measures aim to attract rational investors, rather than "all in" speculators.

Upgrade of Service Provider Compliance Requirements

By 2025, regulatory trends will become more pronounced. MAS stipulates that all enterprises without a Digital Token Service Provider (DTSP) license must complete a "cleanup" by June 30, 2025, if they wish to continue providing services to overseas clients. Currently, only a few leading companies, such as Coinbase and Circle, have been approved, while some others are in an exemption status. The remaining enterprises must either shift to other markets or quickly complete compliance upgrades.

Fund managers face new challenges

Singapore has also raised the requirements for fund managers. Even when serving only "qualified investors", managers who want to establish cryptocurrency funds must possess the appropriate qualifications. This includes comprehensive requirements such as risk hedging capabilities, client asset identification, internal risk control process establishment, and anti-money laundering reporting mechanisms. This means that the era of establishing a fund simply by relying on "a few industry bigwigs + a PPT + an overseas team" is over.

Regulatory Upgrade: Evolution or Suppression?

Although there are views that Singapore is no longer the "paradise" of Web3, from another perspective, this is actually a normal evolution of regulation. The transition from "allowing trial and error" to "regulating order" is a necessary path for emerging markets to mature. Today's Singapore no longer welcomes purely speculative participants, but it remains one of the most attractive markets globally for teams with real technical capabilities and long-term planning.

However, there are also voices pointing out that the Web3 industry is still in its early development stage, and imposing strict regulations too early may stifle innovation. Finding a balance between promoting innovation and controlling risks will be a continuing challenge for Singapore.