Singapore’s bold approach to regulating digital assets

Singapore has long been recognised as a global leader in digital assets, known for striking a healthy balance between innovation and investor protection. The city-state’s progressive approach, which has accelerated over the last couple of years, has positioned it strongly as a hub for blockchain, digital assets and real-world asset tokenisation. With its clear regulatory frameworks, strong emphasis on compliance, and commitment to fostering a responsible digital economy, Singapore continues to attract fintechs, institutional investors and blockchain entrepreneurs.

The Lion City offers many benefits including a pro-business environment, high-class infrastructure, connectivity to other markets and a skilled pool of employees. It provides a supportive home for digital asset innovation and was one of the first jurisdictions to pro-actively regulate the sector, as well as becoming a key hub for the wider Asia-Pacific region.

A clear and adaptive framework

One of the key reasons Singapore is a preferred hub for digital asset businesses is its well-defined and forward-thinking regulatory framework. The Monetary Authority of Singapore (MAS), the country’s financial regulator and de facto central bank, has established clear guidelines, providing greater certainty for businesses.

The Payment Services Act (PSA), which provides a licensing framework for payment service providers, is the cornerstone of Singapore’s digital asset regulation. Since 2021, the PSA framework has included those dealing in Digital Payment Tokens (cryptocurrencies). Regulation ensures that exchanges, custodians and wallet providers adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, reducing the risks associated with illicit financial activities.

MAS classifies digital tokens based on their function. Digital Payment Tokens are covered under the Payment Services act, while security tokens fall under the Securities and Futures Act (SFA). This ensures that companies raising funds through tokenisation comply with investor protection laws, similar to traditional securities markets. Since April 2024, the PSA has expanded the scope of regulated cryptocurrency-related activities to include custodial services covering both cross-border money transfers and the transmission of crypto between accounts and exchanges.

MAS has been pro-active in supporting industry to adapt to its frameworks and has also harmonised its rules in line with other jurisdictions, such as becoming one of the first regulators to implement the Financial Action Task Force (FATF) Travel Rule – which requires financial institutions to share information about the sender and recipient of transactions above a certain threshold. The regulator has also given guidance on anti-money laundering, customer protection, safekeeping and segregation of funds. The convergence of regulatory standards across regions and the clarity provided by MAS, as the sole regulator for the industry, is providing market participants with greater confidence that Singapore is a place where they can plan to build and expand their operations.

Encouraging innovation while mitigating risks

Although it places a strong emphasis on regulation and compliance, Singapore clearly recognises the innovative potential of blockchain technology and digital assets to transform financial services. To foster such innovation, MAS launched Project Guardian, a collaborative initiative involving major financial institutions to explore asset tokenisation and decentralised finance (DeFi) use cases within a regulated framework. This initiative demonstrates Singapore’s willingness to integrate emerging technologies into its financial ecosystem while managing the associated risks.

Further, Singapore’s regulatory sandbox allows fintech companies to experiment with new digital asset solutions in a controlled environment. The initiative enables startups to test blockchain applications, stablecoins, and other digital asset products under regulatory supervision, helping them refine their models before obtaining full licenses.

Institutional adoption and digital asset custody

Recognising the increasing institutional interest in digital assets, Singapore has developed a robust framework for custody solutions. Traditional banks and specialised digital asset custodians must adhere to high security and compliance standards, ensuring the safekeeping of assets for institutional investors. New applicants for the PSA license are required to have an audit conducted on regulatory areas such as AML and safeguarding, and this is one of the prerequisites for getting approval.

Moreover, MAS has approved various exchange-traded funds (ETFs) and other structured products that provide regulated exposure to digital assets. This has bolstered institutional confidence in the Singaporean market, attracting hedge funds, asset managers, and family offices looking to diversify their portfolios with blockchain-based assets.

A global hub for stablecoins and CBDCs

Singapore has taken significant steps toward regulating stablecoins, recognising their potential for cross-border payments and financial inclusion. In 2023, MAS introduced new stablecoin regulations that mandate issuers to maintain sufficient reserves, ensure price stability, and uphold redemption guarantees. This positions Singapore as a key jurisdiction for compliant stablecoin projects looking to scale globally.

Singapore has also been actively exploring a Central Bank Digital Currency (CBDC) through Project Ubin, a government-backed initiative which has tested blockchain-based interbank settlements. MAS stance on wholesale CBDCs reflects its commitment to staying at the forefront of digital finance innovation.

Striking a balance between regulation and growth

While Singapore’s regulatory approach is progressive, it is also stringent in enforcing compliance. MAS has taken decisive actions against non-compliant firms, revoking licenses and adding to its Investor Alert List to maintain trust in the ecosystem. This ensures that well-regulated and responsible players operate within the Singaporean market.

At the same time, Singapore remains open to dialogue with industry participants, regularly updating its policies to accommodate new technological advancements and business models. This collaborative regulatory approach has been crucial in maintaining its reputation as a digital asset hub while safeguarding financial stability.

Singapore on the global scene

The arrival of a new US administration, which is making digital assets a key pillar of its strategy, is casting a stronger spotlight on the industry globally. Regions like Asia-Pacific and MEA currently have the edge but will be watching the US’s approach under President Trump closely to see what impact this has on their competitiveness.

By continuing to provide regulatory clarity and harmonisation, supporting institutional adoption and fostering innovation through initiatives like Projects Guardian and Ubin, the city-state is likely to continue to attract top-tier digital asset firms and investors. For established institutions and new market entrants looking to navigate the future of digital finance, Singapore remains a model of regulatory excellence in the digital asset landscape.

 

Sources:

zodia-custody.com/singapores-digital-assets-race-when-the-lion-roars-2

https://www.mas.gov.sg/schemes-and-initiatives/project-guardian

coinspeaker.com/monochrome-registers-bitcoin-ethereum-etfs-singapore-details

mas.gov.sg/…/mas-finalises-stablecoin-regulatory-framework

mas.gov.sg/…-and-initiatives/project-ubin

straitstimes.com/…/binancecom-placed-on-mas-investor-alert-list

mas.gov.sg/investor-alert-list