Singapore’s War on Web3: Regulatory Arbitrage Era Ends, a Great Web3 Exodus Begins

By: 菠菜

Original link:

https://mp.weixin.qq.com/s/a7gyO8hnN0FEOMSwMaGFHw?scene=1

On May 30, 2025, the Monetary Authority of Singapore (MAS) released its response to the new regulations on Digital Token Service Providers (DTSPs). Many have yet to realize that this move could reshape the entire Web3 landscape across Asia.

The new rules take effect on June 30, 2025, and MAS has made it crystal clear: there will be no grace period. A large-scale “Web3 retreat from Singapore” may already be underway.

“We will be extremely cautious.”

When MAS openly expressed this stance in a sternly worded consultation paper, it marked an unexpected farewell from the country once hailed as “Asia’s crypto haven”. This isn’t a slow policy pivot — it’s a regulatory cliff dive.

For projects and institutions still hesitating, the question is no longer “Should we leave?” but “When?” and “Where to?”

The Glory Days: Golden Era of Regulatory Arbitrage

Remember Singapore in 2021? When China imposed a full ban on crypto trading and the U.S. SEC cracked down on everything, Singapore opened its doors to Web3 entrepreneurs.

Three Arrows Capital, Alameda Research, FTX’s Asia HQ — major players chose to settle here. It wasn’t just the 0% capital gains tax. MAS at the time was actively “embracing innovation.”

Back then, Singapore was a sanctuary for regulatory arbitrage. Projects could register a company here and legally offer digital asset services to users outside Singapore, all while basking in the credibility of a global financial hub. The “based in Singapore, serving the world” model attracted droves of Web3 builders.

Today, the new DTSP regime slams that door shut. The message is blunt:

“If you’re in Web3 without a license, get out of Singapore.”

What Is a DTSP? A Definition with Chilling Implications

DTSP stands for Digital Token Service Provider. According to Section 137 of the FSM Act and clause 3.10 of the document, a DTSP includes two types of entities:

1. Individuals or partnerships operating from a place of business in Singapore;

2. Companies incorporated in Singapore (regardless of where they are based) that provide digital token services abroad.

This seemingly simple definition hides serious regulatory risks.

So what counts as a “place of business” in Singapore? MAS defines it as:

“Any location in Singapore used by the licensee to conduct business — including mobile booths that can move from one location to another.”

Key takeaways from this definition:

● “Any location”: not limited to formal commercial premises

● “Including booths”: even mobile setups are covered

● “Used to conduct business”: activity, not formality, determines risk

In plain terms: if you’re unlicensed and conduct any crypto-related business in Singapore, at any location, you risk violating the law — whether you’re a local company, a foreign firm, or serving clients abroad.

Is Working from Home Illegal?

Baker McKenzie addressed this very concern in its response to MAS:

“Given the prevalence of remote work, does MAS intend to cover individuals employed by overseas entities but working from home or residential premises in Singapore?”

Their concerns were practical and real. They cited cases like:

● Individuals offering DT services from home on behalf of foreign companies (e.g., consultants)

● Remote employees or directors of foreign firms working from Singapore

They argued for an exemption:“Residential premises should not be treated as business locations, as they are generally not considered licensed places of business.”

MAS, however, poured cold water on that hope:“Under Section 137(1) of the Financial Services and Markets Act, any individual conducting digital token services for overseas clients from a place of business in Singapore requires a DTSP license, unless exempted under Section 137(5). If the individual is based in Singapore and providing services to overseas persons, they must apply for a license. However, if the individual is an employee of a foreign-registered company and performing work solely as part of that employment, they will not trigger licensing requirements.”

But MAS adds:“If individuals work from co-working spaces or affiliated offices of the overseas company, they’re far more likely to be captured under the regulation.”

Summary of the New Rules

● Without a license, no individual or company may conduct digital token services from any place of business in Singapore — regardless of whether the clients are local or overseas

● Remote work for overseas employers from residential homes may be tolerated

● But many grey areas remain:

MAS has not clarified key points:

● Are founders considered employees? What if they hold equity?

● If a BD or salesperson from a foreign company conducts a meeting in a shared office, does it count as “conducting business” on Singapore soil?

A Broad Definition That May Catch KOLs Too?

MAS’s definition of “digital token services” is sweeping — covering nearly every token type and service model. Shockingly, even publishing research reports may fall under this scope.

According to paragraph (j) in the First Schedule of the FSM Act:

“Any service related to the sale or offer of digital tokens, including:(1) Providing advice (electronically, in print, or otherwise) about digital tokens;(2) Publishing or disseminating research analysis or reports (in any form) related to digital tokens.”

This could mean that if a KOL or analyst publishes a token report in Singapore, they might require a DTSP license — or risk being deemed in violation.

The Blockchain Association of Singapore asked MAS directly:“Will traditional research reports be deemed related to token offerings? How should participants distinguish between reports that are subject to regulation and those that aren’t?”

MAS gave no clear answer, leaving all content creators walking a tightrope.

Who’s at Risk?

High-Risk Individuals:

● Independent workers: devs, consultants, market makers, miners, etc.

● Content creators & KOLs: influencers, analysts, community managers

● Project leads: founders, BD, sales, and other core business personnel

High-Risk Institutions:

● Unlicensed exchanges (CEX & DEX)

● Protocol teams: DeFi, wallets, NFT projects, etc.

Conclusion: The End of Regulatory Arbitrage in Singapore

A grim reality is emerging: Singapore is serious this time. Anyone non-compliant is at risk of being forced out — and nearly all digital token-related activities could fall under the new regime. Whether you’re in a skyscraper office or working from your living room, whether you’re a CEO or a freelancer — if you’re touching crypto, you’re under scrutiny.

And with the blurred lines around what counts as “place of business” and “conducting business,” MAS is likely to enforce by example — punishing early violators to send a message.

As for last-minute compliance? Don’t count on it. MAS has made it clear: DTSP licenses will be approved “only in extremely limited circumstances” with extreme caution.

In Singapore, the regulatory arbitrage era is officially over. Now begins the era where big fish eat the small.

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