Basic Research on Singapore's Crypto Tax System and Supervision System (II)

# Research on Singapore's Cryptocurrency Regulation  

Written by: FinTech  

For the first half of the content, please refer to *Basic Research on Singapore's Cryptocurrency Taxation and Regulatory Regime (Part 1)*  

## IV. Basic Research on Singapore's Cryptocurrency Regulation  

### (I) Basic Framework  

In recent years, Singapore has continuously strengthened and refined the standardized regulation of cryptocurrency assets, gradually forming a legal framework centered on the **Payment Services Act 2019 (PSA)** and the **Financial Services and Markets Act 2022 (FSMA)**.  

- The former establishes license management, Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements, and operational compliance obligations for Digital Payment Token (DPT) services.  

- The latter supplements provisions on market integrity, cross-border cooperation, and law enforcement powers within the broader scope of financial services.  

These two pieces of legislation are interconnected, providing clear legal basis and compliance boundaries for the issuance, trading, custody, payment, and related services of cryptocurrency assets.  

Under this framework, the Monetary Authority of Singapore (MAS) has significantly tightened license issuance and business conduct standards in recent years, supported by strict law enforcement. With the entry into force of key licensing provisions of the FSMA this year, MAS requires all cryptocurrency enterprises that have established entities in Singapore but only serve overseas clients to obtain licenses within a deadline; otherwise, they will face heavy fines and criminal liabilities.  

- For example, the trading platform Tokenize Xchange announced its withdrawal from the Singapore market due to obstacles in license applications and shifted its business to Malaysia and Abu Dhabi.  

- Meanwhile, Binance chose to retain its local team to continue advancing license applications, while Bitget, Bybit, and others considered relocating some operations to regions with relatively relaxed regulations.  

### (II) Key Provisions  

#### 1. Payment Services Act (PSA)  

The PSA is the first comprehensive regulation systematically covering Digital Payment Token (DPT) services. Its original purpose is to address payment and capital flow risks brought about by the rise of financial technology (FinTech) and cryptocurrency assets.  

Adopting a **"function-based supervision"** approach, the PSA brings all activities involving capital flow and payment functions under regulation, regardless of their technical form. In terms of specific design:  

- It classifies payment services and specifically establishes a category of "Digital Payment Token Services," covering business activities such as the exchange of tokens for fiat currency, token-to-token exchange, token custody, wallet services, and intermediary matching.  

- The regime directly requires all relevant institutions to apply for a license before entering the Singapore market. Common license types include:  

 - **Standard Payment Institution (SPI) License**: Applicable to small and medium-sized enterprises with smaller business scales.  

 - **Major Payment Institution (MPI) License**: Applicable to enterprises with higher transaction volumes or involving multiple payment services, which imposes higher requirements on capital, risk management, and compliance standards.  

To prevent systemic risks, the PSA also sets strict compliance and business supervision requirements, such as:  

- Know-Your-Customer (KYC) procedures  

- AML/CFT processes  

- Customer fund protection and segregation measures  

- Prohibition of misleading promotions and market manipulation  

- Regular submission of business and financial reports to MAS  

In recent years, as application thresholds have been continuously tightened, most internationally renowned trading platforms (such as Binance, Bybit, Crypto.com, etc.) have encountered strict reviews in their license applications, and some have even withdrawn from the Singapore market. This phenomenon directly reflects the PSA’s institutional orientation of "high thresholds and strong supervision."  

#### 2. Financial Services and Markets Act (FSMA)  

The FSMA mainly aims to make up for the PSA’s deficiencies in cross-border business, market integrity, and law enforcement.  

As Singapore has gradually become a regional cryptocurrency hub, a large number of overseas service providers have offered DPT services to Singapore residents through online channels. The FSMA emerged to further expand the scope of supervision, with key provisions including:  

1. **Cross-border Supervision**: It clarifies that even if an enterprise operates overseas, if it provides relevant services to Singaporean clients, it must comply with local regulations; otherwise, it will face criminal or civil penalties.  

2. **Market Integrity**: It grants MAS greater authority to crack down on market manipulation, false statements, insider trading, and other behaviors to safeguard market credibility.  

3. **AML/CFT**: It requires both domestic and overseas service providers to meet international standards and strengthen cross-border information disclosure and reporting mechanisms.  

4. **Law Enforcement Powers**: It empowers MAS to directly impose fines, issue injunctions, impose business restrictions, and even initiate criminal prosecutions.  

These provisions have directly reshaped the industry landscape:  

- On one hand, some unlicensed overseas exchanges have been forced to withdraw as they cannot legally access Singaporean clients.  

- On the other hand, licensed institutions must meet higher capital and transparency requirements, such as establishing more robust internal compliance systems and risk control frameworks.  

Notably, some key provisions of the FSMA were implemented in phases after their release and had all taken effect by June 30, 2025.  

### (III) Specific Details  

#### 1. Licensing  

Singapore implements a strict licensing and approval management system for Digital Payment Token Service Providers (DPTSPs), mainly based on the **Payment Services Act 2019 (PSA)** and its amendments, as well as relevant provisions in **Part 9 of the Financial Services and Markets Act 2022 (FSMA)**.  

##### (1) DPT Licensing Regime under the PSA  

Under the PSA, the sixth category of "Digital Payment Token Services" is formally brought under supervision, covering businesses such as the exchange of digital payment tokens for fiat currency, token-to-token exchange, token custody, wallet services, and intermediary matching. Institutions providing the above services must apply for one of the following two types of licenses:  

| License Type               | Applicable Entities                          | Key Application Requirements                                                                 |  

|----------------------------|----------------------------------------------|----------------------------------------------------------------------------------------------|  

| Standard Payment Institution (SPI) License | Small and medium-sized DPTSPs                | - Registered as a Singaporean enterprise with local business premises and records available for regulatory inspection.<br>- At least one senior manager is a Singapore citizen, permanent resident, or holds an Employment Pass.<br>- Minimum paid-up capital of SGD 100,000.<br>- Risk management capabilities commensurate with business scale. |  

| Major Payment Institution (MPI) License   | Enterprises with high transaction volumes or involving multiple payment services | Higher requirements, typically including larger-scale capital reserves, customer fund segregation, and security assurance mechanisms. |  

In 2023, MAS further tightened application requirements: All enterprises applying for new licenses or amending existing licenses to add DPT services must submit:  

- A legal opinion issued by a professional law firm, clarifying the business model and whether the relevant services are governed by the PSA.  

- A compliance assessment report completed by an independent external audit firm, covering business compliance and AML/CFT mechanisms.  

##### (2) Expanded Supervision of Digital Token Service Providers (DTSPs) under the FSMA  

Part 9 of the FSMA introduces a licensing regime for Digital Token Service Providers (DTSPs), aiming to fill the gap in the PSA’s supervision of cross-border businesses. Since June 30, 2025, any institution that is a Singapore-registered company or has a substantial operating presence in Singapore and provides digital token services to overseas clients must apply for a DTSP license.  

MAS has stated that DTSP models of this type pose high money laundering risks and are difficult to supervise, so such licenses will rarely be approved—effectively blocking the gray area of regulatory arbitrage. Even in the rare cases where licenses are issued, the applicants must strictly meet a series of standards, including AML/CFT checks, cross-border information sharing, and technical and business compliance.  

Whether under the PSA or the FSMA, the licensing regimes aim to ensure that digital payment token services operate in Singapore under high-standard supervision through high-threshold licenses, strict compliance requirements, and prevention of regulatory arbitrage. These measures help maintain financial stability and market integrity while clarifying the access boundaries for legitimate operators.  

#### 2. Stablecoins  

Singapore took the lead globally in launching a dedicated stablecoin regulatory framework. In August 2023, MAS released the **Regulatory Framework for Stablecoins**, which came into force in October 2024 in the form of amendments to the Payment Services Act (PSA) and supporting subsidiary legislation. This framework mainly targets **"Single-Currency Stablecoins (SCS)"**, aiming to protect user funds, enhance transparency, and boost market confidence.  

According to MAS regulations, a stablecoin can only be recognized as a "MAS-regulated Stablecoin" (qualified stablecoin) if it meets the following conditions:  

| Criterion              | Specific Requirements                                                                 |  

|------------------------|----------------------------------------------------------------------------------------|  

| Pegging Object         | Must be fully pegged to and redeemable at a 1:1 ratio with the Singapore Dollar (SGD) or a G10 fiat currency. |  

| Issuer                 | Limited to issuers registered and regulated in Singapore.                              |  

| Issuance Scale         | Only stablecoins with a circulation scale of SGD 5 million or more are subject to mandatory supervision. |  

| Payment Attribute      | Must be mainly used as a payment tool rather than a speculative investment token.      |  

To ensure the redeemability of stablecoins, regulations require qualified stablecoins to have sufficient high-quality reserve assets:  

- **100% Reserve Backing**: The total issuance must be fully supported by low-risk, highly liquid assets (such as cash and treasury bills).  

- **Custody Requirements**: Reserve assets must be deposited with regulated financial institutions (banks or custodians) and segregated from the issuer’s own funds.  

- **Regular Audits**: Issuers must publicly release monthly reserve reports and conduct annual audits by independent audit firms to ensure sufficiency and transparency.  

Stablecoin issuers must fulfill a series of information disclosure and risk management obligations:  

- **Whitepaper Disclosure**: Issue a detailed whitepaper explaining the governance mechanism, reserve arrangements, and liquidation and redemption rules.  

- **Risk Disclosure**: Clearly inform users that stablecoins are not risk-free and that market liquidity and technical risks exist.  

- **Redemption Obligation**: Commit to redeeming stablecoins at a 1:1 ratio within a reasonable period (usually 5 business days).  

- **Prohibition of Mixed Issuance**: The same institution shall not issue both regulated and unregulated stablecoins to avoid confusing investors.  

MAS’s goal in promoting stablecoin regulation is to establish a "trustworthy category of stablecoins" in the market. Qualified stablecoins will enjoy higher recognition in payment systems and financial applications, and MAS also plans to allow these stablecoins to interoperate with traditional electronic payment systems. In contrast, stablecoins that do not meet the criteria (such as those pegged to non-G10 currencies) shall not be promoted as MAS-regulated stablecoins and may be subject to stricter advertising and usage restrictions.  

#### 3. Compliance and Reporting  

In Singapore, cryptocurrency asset service providers (DPTSPs) must not only obtain licenses but also comply with strict compliance and reporting obligations. These requirements mainly derive from the Payment Services Act (PSA), the Financial Services and Markets Act (FSMA), and relevant guidelines issued by MAS, with a focus on three aspects: KYC/AML processes, transaction record retention, and suspicious transaction reporting.  

##### (1) Customer Due Diligence (CDD) and Ongoing Monitoring  

DPT service providers are required to implement robust customer due diligence and ongoing monitoring measures:  

- **KYC Verification**: Before a customer opens an account or conducts a large-value transaction, the provider must verify the customer’s identity and collect information such as name, address, and identification documents (PSA §23, FSMA §36).  

- **Risk-Level Management**: Providers shall adopt differentiated due diligence measures based on the customer’s risk level (e.g., high-risk customers such as cross-border capital flow participants and Politically Exposed Persons (PEPs)).  

- **Ongoing Monitoring**: Continuously monitor customers’ transaction patterns; if abnormal transaction patterns are detected, the provider must strengthen investigations and retain records.  

##### (2) Transaction and Customer Data Retention  

Service providers must keep complete records of all DPT-related transactions and customer data for future regulatory reviews or law enforcement:  

- **Retention Period**: At least 5 years (PSA §47).  

- **Scope of Records**: Including transaction date, amount, counterparty identity, payment instrument, and explanation of the source and purpose of funds.  

- **Electronic Archiving Requirements**: Electronic systems may be used for storage, but the authenticity, completeness, and traceability of data must be ensured.  

##### (3) Suspicious Transaction Reporting  

Under Singapore’s **Control of Drugs (Confiscation of Proceeds) Act (CDSA)** and **Terrorism (Suppression of Financing) Act (TFA)**, all DPT service providers are obligated to report suspicious transactions:  

- **Trigger Conditions**: If a service provider knows or suspects that a transaction involves money laundering, terrorist financing, or other illegal activities, it must submit a Suspicious Transaction Report (STR) to the Suspicious Transaction Reporting Office (STRO) of Singapore within 15 business days.  

- **Criminal Liability**: Failure to report as required may result in criminal liability for both the institution and the responsible individuals (CDSA §39, TFA §8).  

- **International Cooperation**: MAS shares some STR data with overseas regulatory authorities for cross-border law enforcement cooperation.  

Through compliance and reporting mechanisms, Singapore ensures the transparency and traceability of the DPT market:  

- KYC/AML processes prevent anonymous transactions from concealing illegal capital flows.  

- Transaction record retention provides evidence for subsequent audits and regulatory investigations.  

- Suspicious transaction reporting offers an early warning mechanism for combating cross-border money laundering and terrorist financing.  

The combination of these three elements has enabled Singapore to establish a relatively strict compliance baseline for cryptocurrency assets globally.  

#### 4. Investor Protection  

In Singapore, financial regulatory authorities not only focus on financial stability and compliance obligations but also attach great importance to investor protection related to cryptocurrency assets. The core requirements are reflected in three aspects: restrictions on advertising and promotion, risk disclosure obligations, and prohibition of misleading statements. These requirements mainly come from the **Financial Services and Markets Act 2022 (FSMA)**, the **Payment Services Act 2019 (PSA)**, and specialized guidelines issued by MAS (in particular, MAS’s 2022 *Guidelines on Advertising by Digital Payment Token Service Providers*).  

##### (1) Restrictions on Advertising and Promotion  

MAS clearly requires that DPT service providers shall not promote their services to retail customers through exaggerated returns or inappropriate channels:  

- **Restricted Channels**: Prohibition of promoting DPT services in public places (such as subways, bus stops, and shopping malls) or events with high public exposure.  

- **Promotional Media**: Prohibition of using gifts, lotteries, airdrops, or similar methods to attract public participation.  

- **Permitted Channels**: Information disclosure is only allowed through the provider’s official website, mobile applications, or official social media pages.  

##### (2) Risk Disclosure Obligations  

All DPT service providers must display risk warnings prominently on customer interfaces to ensure investors understand the high-risk nature of digital assets:  

- **Content of Warnings**: Must state that "Cryptocurrencies are not suitable for all investors; their value may fluctuate significantly and may lead to total loss."  

- **Presentation Method**: Warning statements must be clear and visible, and shall not be hidden in lengthy documents or small-font clauses.  

- **Special Protection for Retail Investors**: For first-time trading customers, service providers must conduct a suitability assessment to confirm their risk tolerance.  

##### (3) Prohibition of Misleading Statements  

DPT service providers must adhere to the principles of truthful, complete, and non-misleading statements:  

- **Prohibited Behaviors**: Using misleading terms such as "guaranteed returns," "zero risk," or "capital preservation" is not allowed.  

- **Information Disclosure**: Complete, accurate, and easy-to-understand explanations must be provided regarding product terms, fees, custody arrangements, and liquidation mechanisms.  

- **Consequences of Violations**: If misleading statements are made, MAS has the authority to revoke licenses, impose heavy fines, and in severe cases, pursue criminal liability.  

The core logic of Singapore’s investor protection mechanism lies in **restricting improper promotion + enhancing risk awareness + ensuring truthful disclosure**. In 2022, MAS specifically emphasized that cryptocurrency assets shall not be promoted as a "shortcut to speculative wealth," and market participants should be guided to rationally recognize risks. This series of measures has made Singapore one of the first jurisdictions globally to strongly regulate cryptocurrency asset advertising and risk disclosure, effectively reducing the risk of significant losses for retail investors due to information asymmetry and market speculation.  

Overall, Singapore’s regulatory orientation has always reflected a **compliance-first** logic. Regulators have established a clear legal framework supplemented by detailed implementation standards, systematically integrating cryptocurrency asset businesses into the existing financial governance system. International media and the industry generally agree that this institutional arrangement has effectively improved market transparency and consolidated Singapore’s compliance reputation as a global financial center. However, high compliance thresholds have objectively prompted some enterprises to relocate to jurisdictions with more relaxed regulations, such as Hong Kong or Dubai. As a result, Singapore has gradually established an image as a benchmark for strict regulation in the global cryptocurrency governance landscape: while it may inhibit market expansion and innovation vitality in the short term, it will help shape a stable, secure, and sustainable market environment in the long run. In summary, this section has systematically summarized the relevant regulations and regulatory practices, and the key context has been clearly presented. For more detailed provisions, please refer to the original texts of the PSA and FSMA.  

# V. Conclusion  

Overall, Singapore has established a relatively comprehensive dual framework of taxation and regulation for cryptocurrency asset governance.  

In terms of taxation, the Singaporean government has consistently treated cryptocurrencies as non-legal tender. Therefore, their daily use is primarily governed by income tax and Goods and Services Tax (GST) rules: Clear boundaries between taxable and tax-exempt scenarios have been defined for activities such as profiting from cryptocurrency transactions, using tokens to pay for goods and services, and issuing or exchanging digital tokens. Since Singapore does not levy a capital gains tax, the sale of cryptocurrency assets solely to profit from appreciation during holding generally incurs no tax, keeping its tax regime relatively straightforward.  

In terms of regulation, Singapore adheres to a "compliance-first" philosophy. Through a legal system centered on the **Payment Services Act 2019 (PSA)** and the **Financial Services and Markets Act 2022 (FSMA)**, it has established detailed rules covering licensing systems, stablecoin management, compliance and reporting, and investor protection. The Monetary Authority of Singapore (MAS) ensures the market operates under conditions of high transparency and strict entry thresholds through rigorous law enforcement and ongoing regulatory guidance. Although some enterprises have chosen to relocate to jurisdictions with relatively relaxed regulations (such as Hong Kong or Dubai) due to cost and regulatory constraints, Singapore has gained global recognition as a model of high-standard regulation, providing institutional guarantees for the long-term sustainable development of the market.  

From a global perspective, Singapore’s approach highlights a combined model of "clear taxation and strict regulation": Compared with the fragmented regulation in the United States, the European Union’s ongoing rollout of the Markets in Crypto-Assets Regulation (MiCA), and the United Kingdom’s lag in stablecoin regulation, Singapore has built a more complete institutional framework. While such high thresholds may inhibit business expansion in the short term, they provide replicable experience for the integration of cryptocurrency assets into the traditional financial system through a transparent and stable institutional environment in the long run.  

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