Singapore Tightens Crypto Rules, Overseas Clients Face 100% License Requirement

The Monetary Authority of Singapore (MAS) has implemented stringent measures on June 30 to regulate digital token service providers, focusing on those dealing solely with overseas clients. These regulations aim to mitigate money laundering risks in cryptocurrency transactions, influencing international market dynamics.

MAS announced new rules requiring digital token service providers serving overseas customers to obtain operating licenses. This move is aimed at confronting financial crimes, especially money laundering through cryptocurrencies. The regulator emphasized the associated risks, stating it significantly hampers their supervisory abilities for operations conducted outside Singapore. Following this announcement, digital token services focused exclusively on foreign clients now face stricter scrutiny. They must acquire a license to operate, but the MAS disclosed its intention to rarely grant such licenses, necessitating many platforms to potentially cease operations. This regulatory measure will likely dampen cross-border cryptocurrency flows.

Market and industry players have generally reacted cautiously to the announcement. Chengyi Ong, Head of Asia Pacific Policy at Chainalysis, remarked, “With the new DTSP regime, MAS is reinforcing that financial integrity is a red line. The goal is to insulate Singapore from the reputational risk that a crypto business based in Singapore, operating without sufficient oversight, is knowingly or unknowingly involved in illicit activity.” The absence of immediate commentary from high-profile figures in the crypto industry suggests a period of strategic realignment could follow.

Singapore’s stringent approach to crypto operations reflects its response to past crises, notably the collapses of major crypto firms like Three Arrows Capital and Terraform Labs, headquartered in Singapore in 2022. According to the analyst's forecast, these regulatory updates in Singapore will necessitate substantial operational overhauls for affected businesses. Historical patterns indicate such changes often trigger short-term liquidity declines in the centralized exchange landscape. Nevertheless, long-term compliance with these norms could bolster institutional trust in regulated environments.