New Singapore Encryption Asset Regulatory Rules: Industry Reshuffle Imminent

Recently, the financial regulatory authority in Singapore announced that the "Financial Services and Markets Act" will officially come into effect on June 30, 2025. This marks the entry of Singapore's regulation of the encryption asset industry into a new phase, referred to by industry insiders as Singapore's version of the "9.24 moment." This move will have a profound impact on the encryption asset industry and may lead to a large number of unlicensed projects and practitioners leaving the Singapore market.

DTSP New Regulations: New Standards for the Regulation of Encryption Assets

DTSP (Digital Token Service Providers) refers to digital token service providers, which is a regulatory framework established in Singapore for encryption asset service providers. According to the new regulations, the following two types of institutions are required to obtain a DTSP license:

1. Individuals or entities engaging in encryption asset-related business within Singapore
2. Companies registered in Singapore that provide digital token services to overseas clients.

It is worth noting that the new regulations have a very broad definition of "conducting business in Singapore". Whether it's setting up a stall on the street or operating an encryption asset business from home via the internet, as long as one is within Singapore, it is considered "conducting business in Singapore".

Regulated Business Scope

The new regulations cover transactions and financial activities related to encryption assets, mainly including:

1. Digital Token Trading Services
2. Digital Token Custody Service
3. Digital Token Exchange Services
4. Digital Token Payment Services

Practitioners in these business areas must obtain a DTSP license to operate legally.

Exempted Business from Regulation

Certain technical support services related to encryption assets but of a marginal nature are not within the regulatory scope, such as:

1. Pure data storage service
2. Authentication Service
3. Network Communication Services
4. Other non-core technical support services

These businesses can operate without applying for a DTSP license.

The Impact of New Regulations and Industry Responses

The regulatory measures in Singapore were not introduced suddenly. In fact, the Financial Services and Markets Act was published as early as 2022, granting the industry a three-year transition period. However, many practitioners did not take it seriously enough and now face the dilemma of having to relocate again.

For those seeking new development bases in the encryption asset industry, Thailand, Vietnam, Malaysia, and the Philippines in Southeast Asia may be better choices, as these countries have adopted a relatively open attitude towards encryption assets in recent years. Additionally, some practitioners may consider relocating to regions such as Dubai or Abu Dhabi, attracted by their flexible capital flow policies.

Conclusion

The trend of compliance in the encryption asset industry has become a global consensus. For practitioners who wish to develop long-term in this industry, placing importance on compliance construction and early layout of relevant licenses will become increasingly important. This regulatory move in Singapore may very well be a microcosm of the tightening regulation of encryption assets worldwide. Industry participants need to prepare in advance and find a balance between compliance and innovation in order to establish a foothold in this rapidly changing field.