Digital token service providers relocating should not be surprised at new licensing rule: MAS

Singapore Law Watch

23-06-2025

Digital token service providers relocating should not be surprised at new licensing rule: MAS
Source: Straits Times
Article Date: 23 Jun 2025
Author: Timothy Goh
The Monetary Authority of Singapore will require digital token service providers offering services to customers outside Singapore to be licensed from June 30.
Digital token service providers (DTSPs) scrambling to relocate their operations and staff ahead of new regulations taking effect on June 30 should have anticipated the changes and prepared accordingly, the Singapore authorities said.
In a June 6 clarification to a consultation paper setting out proposed regulations for the sector on May 30, the Monetary Authority of Singapore (MAS) said DTSPs offering services solely to customers outside Singapore – whether involving digital payment tokens or tokenised capital market products – will need to be licensed from June 30 or stop their operations.
Digital payment tokens include cryptocurrencies like Bitcoin, while tokenised capital market products are digital representations of securities such as stocks or bonds.
In its June 6 clarification, MAS also noted that it has set the bar high for licensing, and will generally not issue a licence to such providers.
MAS said service providers for digital payment tokens or tokens of capital market products that serve customers in Singapore are already regulated, and there will be no change to what these licensed providers can do.
It added that providers serving customers in Singapore may also offer services to overseas clients, while those dealing with other types of tokens – such as utility or governance tokens – are not subject to licensing or regulation under the new regime, and are therefore unaffected.
These clarifications follow MAS' response to industry feedback in the May 30 paper, in which it noted that firms serving only overseas clients may be more vulnerable to money laundering and terrorism financing risks owing to the internet-based and cross-border nature of their services.
MAS added that the rationale for the new regulations is to better exercise oversight over money laundering risks and preserve Singapore's reputation as a progressive and well-regulated hub for digital assets.
The move has nevertheless sparked concerns among some DTSPs, prompting them to rethink their presence in Singapore in favour of more lenient jurisdictions.
A Bloomberg article on June 12 reported that the new regulations had caused confusion and job losses as firms rush to comply, with some unlicensed cryptocurrency exchanges considering exiting the Republic.
Firms like Bitget and Bybit were cited as examples.
Meanwhile, industry sources who declined to be named told The Straits Times that more than 500 staff – from management to junior levels across various firms supporting Singapore's fintech ecosystem – are likely relocating to the United Arab Emirates or Hong Kong, drawn by the softer regulatory stance on digital assets in those markets.
When asked by ST to comment on the Bloomberg report, MAS said the new regulations should not come as a surprise, as its position has been consistently communicated to the industry from as early as 2022, and the regulations are not expected to affect a 'significant number' of entities in Singapore.
The central bank added that its regulatory framework is still intended to be facilitative of responsible digital asset innovation and real-world applications that boost efficiency and create economic value.
'There are 33 licensed digital payment token service providers, while capital market services licensees are already allowed to provide services relating to digital capital market products,' said MAS, adding that these licensed entities and activities will not be impacted.
Observers and locally licensed players said the new rules provide regulatory clarity and support responsible innovation, but warned that they could also drive talent out of Singapore.
Ms Grace Chong, head of the financial regulatory practice at law firm Drew & Napier, said the new rules reflect Singapore's continued focus on a well-regulated digital asset ecosystem, prioritising stability, integrity and consumer protection.
But firms are also seeking legal clarity on how roles based in Singapore may be perceived under the new regime, particularly where teams support offshore activities, and this has prompted conversations around legal structuring, governance and location of key functions.
'While some firms may explore other jurisdictions, others value regulatory certainty – these shifts mirror broader global trends and how firms respond will shape the industry's direction,' said Ms Chong.
Ms Hannah Puganenthran, compliance head at cryptocurrency exchange Independent Reserve Singapore, said the new rules would benefit licensed providers.
'When all serious players must meet the same standards, it reduces the advantage of those who previously operated with fewer controls or lower compliance costs – it encourages firms to be proactive and responsible,' she said.
Still, the Republic could also risk losing talent and support structures that help the digital asset industry mature, depending on how broadly the rules are applied.
'If an entity is purely administrative and does not handle customer funds, the money laundering and financial terrorism risk may be more perceived than real,' said Ms Puganenthran.
'Licensed entities already face challenges opening bank accounts for operational or administrative purposes – applying the same standards to non-fund-handling entities might be excessive, and could drive valuable talent, experience and expertise out of Singapore.'
While MAS has tightened its rules on retail access to digital assets, it continues to explore their institutional adoption.
For example, the central bank launched Project Orchid in 2021 to examine the infrastructure needed to develop a digital Singapore dollar.
The following year, it announced Project Guardian to explore the use of public blockchains in building open and interoperable networks for trading digital assets across platforms and liquidity pools.
In 2023, it introduced Global Layer One, which explores a new blockchain infrastructure for financial institutions to collaborate and prevent the fragmentation of global liquidity.
Mr Gerald Goh, chief executive of digital asset banking group Sygnum Singapore, said MAS' latest regulatory move is likely to strengthen Singapore's position as Asia's premier hub for institutional digital asset adoption.
'These new developments will reinforce market confidence in Singapore's approach to digital asset regulation,' he added.
Mr Gong Yefeng, risk and strategy director at digital asset trading platform HashKey OTC, said the recent policy clarification is not a retreat, but rather a progression towards a more mature, sustainable and internationally credible ecosystem.
'We view these developments as foundational for sustainable growth, and we remain fully invested in Singapore as a strategic base for our global business,' he said.
Source: The Straits Times © SPH Media Limited. Permission required for reproduction.
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