Singapore's Web3 Regulation Tightens: How Should Practitioners Respond?

On June 30, 2025, the Web3 industry in Singapore will witness an important moment. According to Article 137 of the Financial Services and Markets Act (FSMA), all individuals or companies that have a place of business in Singapore and provide services related to digital tokens, regardless of whether their clients are located within Singapore, must obtain a Digital Token Service Provider (DTSP) license. Otherwise, they will face criminal liability.

The Monetary Authority of Singapore (MAS) clearly stated in a regulatory response document released on May 30 that unlicensed entities must immediately cease overseas operations, and applications in process are not considered a legal basis. This wording has been interpreted by many as "the strictest crypto regulation ever."

To gain a deeper understanding of the overlooked key points in the FSMA document, we interviewed professional lawyers in the field of digital economy. At the same time, we also interviewed 5 Web3 practitioners working in Singapore to understand their views on the regulatory changes in Singapore.

1. Core Points of the Neglected Bill

In our discussions with lawyers specializing in the digital economy, we identified several legislative contents that are worthy of readers' attention:

1. FSMA is a comprehensive upgrade, not an overseas patch.

The FSMA is not only intended to fill the gaps of the original Payment Services Act (PSA), but is also a comprehensive regulatory framework law. Whether the business is aimed at the domestic or overseas market, as long as there is a place of business in Singapore or a company registered in Singapore, it must comply with the FSMA. This marks the official commencement of MAS's comprehensive regulation of local Web3 practitioners.

2. The regulatory focus has shifted from "institutional licensing" to "individual scrutiny".

The FSMA has introduced a regulatory mechanism for individuals, allowing the MAS to directly intervene and isolate high-risk individuals in the financial markets. This means that even freelancers, remote developers, consultants, or KOLs who are not part of management, as long as they provide relevant services within Singapore, could become subjects of regulation.

3. The threshold for FSMA has significantly increased.

Even if you already hold a PSA license, it does not automatically apply universally. The FSMA has significantly raised the compliance threshold, requiring an initial capital of 250,000 SGD, a resident compliance officer, the establishment of an independent audit mechanism, regular submission of compliance reports, and compliance with anti-money laundering and counter-terrorism financing processes and management systems.

II. The Real Reactions of Web3 Practitioners in Singapore

The tightening of regulations has indeed brought pressure and panic to Web3 practitioners. However, to truly reflect whether a country's policies are welcoming to Web3, we need to look at the reactions of the actual companies and practitioners on the ground. Here are the opinions of several Web3 practitioners we interviewed who work in Singapore:

1. Tokenized operation project founders: Small businesses have their own survival strategies.

The founder stated that their project has been affected because almost all meaningful products will ultimately involve transactions, thus touching the regulatory red line of DTSP. For small teams, investing a lot of time and resources in dealing with regulations is an unbearable burden. They believe that Singapore may not be suitable for the development of startup projects, but they remain optimistic and believe that small businesses will find their own way to survive.

2. OTC traders: Singapore is a "pragmatic manager"

This practitioner believes that the underlying tone of Singapore's regulation is pragmatic. They will allow companies that can bring substantial value to stay, while eliminating those that only bring bubbles. He thinks this round of regulation is not that strict, more like "loud thunder but little rain", mainly to shake the mountain and scare the tiger. Companies that truly need licenses have already applied; those that contribute to the government or are genuinely capable will not feel anxious because of this new regulation.

3. Web3 AI Practitioners: Looking at the Essence through Phenomena

The practitioner emphasized that the core of Singapore's governance style is pragmatism. The increasingly strict regulatory terms are due to some issues in the Web3 field that need to be addressed, and the government must intervene to ensure the healthy development of the ecosystem. He noted that more and more freelancers and remote workers are starting to prefer working from home and avoiding actively discussing Web3-related topics in public to reduce risks.

4. Founders residing long-term in Singapore: Web3 is still a part of Singapore's national strategy.

The founder believes that Singapore's regulatory policies in the Web3 field have not undergone drastic changes in recent years, but rather have clarified and refined the existing framework. He pointed out that for most startup projects, Singapore remains an environment with clear regulations, a well-defined path, and abundant resources. In the long run, Web3 is still part of Singapore's national strategy, and the government promotes ecosystem development through various means.

5. AI startup founders: It's a reshuffling period, but it targets the financial sector rather than everyone.

The founder stated that the current regulatory changes have not had a significant impact on their AI startup. He believes that this round of regulation is more targeted at companies and projects with strong financial attributes, while the actual impact on small teams is relatively limited. He still believes that Singapore is a suitable place for small teams and even individual entrepreneurs, especially for overseas Chinese, as Singapore has a natural affinity in terms of language and culture.

Conclusion

The recent tightening of regulations is essentially a self-correction by Singapore as an international financial center, rather than a drive away from the Web3 industry. Web3 practitioners are re-evaluating their choices: whether to stay and accept higher intensity regulations in exchange for long-term policy certainty, or to shift to seemingly friendlier markets that are filled with more uncertainties. In any case, Singapore's Web3 ecosystem is undergoing an important transformation and reshuffling.