Singapore Crypto Regulation: Why Ousted Firms Face a Bleak Future Globally
If you’re involved in the cryptocurrency space, especially if your firm operates internationally, you’ve likely felt the impact of tightening rules. The recent focus on Singapore crypto regulation is a prime example, highlighting a global shift that means the era of finding easy regulatory loopholes is quickly ending.
Understanding the Latest MAS Crypto Directive
Singapore’s financial watchdog, the Monetary Authority of Singapore (MAS), issued a clear directive on May 30: crypto firms and individuals based in Singapore offering services abroad must now get licensed or cease operations. This wasn’t a sudden pivot, despite how it might seem to some. The MAS crypto position on regulating services offered from Singapore, even if to overseas clients, has been consistent for several years, aligning with the Financial Services and Markets Act (FSMA) enacted in 2022.
The core issue here is closing a specific gap. Singapore’s Payment Services Act (PSA) primarily required licenses for firms serving local customers. Given Singapore’s relatively small local market, many international crypto businesses set up shop there but strategically avoided serving Singaporean residents, focusing entirely on foreign markets. This allowed them to operate from a reputable jurisdiction without navigating the complexities of local crypto licensing under the PSA.
The latest MAS action clarifies that offering digital token services from Singapore requires a license under the FSMA, regardless of where the customers are located. This isn’t a new law, but rather the enforcement of an existing one after completing public consultations. As one expert put it, Singapore is first and foremost a global financial center, and its regulations reflect that status.
The Global Crackdown and FATF Crypto Standards
Singapore’s move isn’t happening in a vacuum. It’s part of a broader, coordinated global effort to increase oversight in the crypto sector. This push is largely driven by international bodies like the Financial Action Task Force (FATF), which sets global standards for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT).
Many jurisdictions are now implementing stricter rules:
- Thailand recently expelled unlicensed exchanges.
- The Philippines requires licensed firms to have a physical office.
- The EU’s MiCA framework is rolling out comprehensive rules.
- The UK, South Korea, and Japan are also maturing their regulatory regimes.
This global alignment means that firms ousted from one jurisdiction due to non-compliance with FATF crypto standards and local licensing rules may find similar hurdles elsewhere. The options for regulatory arbitrage are shrinking significantly.
Is Hong Kong Crypto a Viable Alternative?
As firms look for new bases, Hong Kong often comes up as a potential destination, positioning itself as a competing crypto hub with Singapore. However, those hoping for an easy ride in Hong Kong crypto markets might be disappointed.
Hong Kong also has stringent licensing requirements. While it has been actively promoting its crypto ambitions, securing a license there is not straightforward. As of early June, Hong Kong had issued significantly fewer crypto licenses compared to the digital payment token licenses approved by MAS under its PSA. This suggests that while Hong Kong is open for compliant businesses, it’s not a haven for those seeking to avoid robust crypto licensing.
Even firms like Bybit, which faced issues in Thailand, are exploring Hong Kong, but this involves seeking licenses and working with regulators, not bypassing them. Their job postings reflect a focus on compliance roles in various jurisdictions, including Hong Kong and Malaysia.
Nowhere Left to Hide? The Impact of Gray Lists
Another factor driving global compliance is the FATF’s ‘gray list’. Countries placed on this list face increased monitoring due to strategic deficiencies in their AML/CFT regimes. Getting off the gray list requires demonstrating significant progress in implementing FATF standards, including those for virtual assets.
Jurisdictions recently removed from or working to stay off the gray list, such as Thailand, the UAE (including Dubai), and the Philippines, are under pressure to show they are serious about compliance. This means places like Dubai, which have attracted crypto firms, are also tightening their rules. Experts warn that assuming Dubai offers a safe, lenient environment might be a false sense of security, especially as it recently exited the gray list and is still under scrutiny regarding FATF crypto standards.
For crypto firms that have been playing ‘regulatory pinball’, constantly seeking the path of least resistance, the landscape has fundamentally changed. The global push for transparency and compliance means that robust crypto licensing and adherence to AML/CFT standards are becoming non-negotiable requirements, regardless of where a firm chooses to operate from.
Conclusion: Compliance is the Only Way Forward
The message from Singapore and other major financial centers is clear: the time for operating in regulatory gray areas is over. While finding the right jurisdiction with a clear framework remains important, the expectation everywhere is moving towards strong compliance, particularly regarding AML/CFT and licensing.
Firms affected by the stricter Singapore crypto regulation and similar moves globally must now prioritize obtaining necessary licenses and building robust compliance programs. The cost of non-compliance, whether it’s expulsion, fines, or reputational damage, far outweighs the cost of meeting regulatory requirements. The global financial system is demanding accountability from the crypto industry, and there are fewer and fewer places left to hide.
