A Basic Study on Singapore’s Cryptocurrency Taxation and Regulatory System (Part 2)

IV. Basic Research on Crypto Regulation in Singapore

(I) Basic Framework

In recent years, Singapore has continuously strengthened and improved the standardized regulation of crypto 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 licensing management, anti-money laundering and counter-terrorism financing (AML/CFT) requirements, and operational compliance obligations for digital payment token services (DPT services); the latter supplements regulations on market integrity, cross-border cooperation, and law enforcement powers within a broader scope of financial services. The two laws interconnect, providing a clear legal basis and compliance boundaries for the issuance, trading, custody, payment, and related services of crypto assets. Within this framework, the Monetary Authority of Singapore (MAS) has significantly tightened licensing and business conduct regulations in recent years, supplemented by strict law enforcement. With the implementation of key licensing provisions of the FSMA this year, the MAS requires all crypto companies established in Singapore but serving only overseas clients to obtain a license within a specified period, or face heavy fines and criminal liability. Trading platform Tokenize Xchange announced its withdrawal from the Singapore market due to difficulties in its license application, and will shift its operations to Malaysia and Abu Dhabi. Meanwhile, Binance has chosen to retain its local team to continue its license application, while Bitget, Bybit, and others are considering relocating some operations to less regulated regions. (II) Key Provisions The PSA is the first comprehensive regulation to systematically cover digital payment token (DPT) services. Its primary purpose is to address payment and capital flow risks arising from the rise of FinTech and crypto assets. The law adopts a "function-based regulation" approach, meaning that regardless of the technical form, any service involving capital flow and payment functions is included in its regulatory scope. Specifically, the PSA categorizes payment services, specifically creating a "digital payment token service" category that covers a variety of business activities, including token-to-fiat currency exchange, token-to-token exchange, token custody, wallet services, and intermediary matching. This system directly requires all relevant institutions to apply for a license before entering the Singapore market. Common license types include the Standard Payment Institution License and the Large Payment Institution License. The former is suitable for smaller businesses, while the latter imposes higher requirements on capital, risk management, and compliance. To mitigate systemic risks, the PSA also establishes strict compliance and business oversight requirements, such as Know Your Customer (KYC) procedures, Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) procedures, client fund safeguards and segregation measures, prohibitions on misleading advertising and market manipulation, and the regular submission of business and financial reports to the Monetary Authority of Singapore (MAS). In recent years, as application requirements have been tightened, many internationally renowned trading platforms (such as Binance, Bybit, and Crypto.com) have faced strict scrutiny in their license applications, with some even withdrawing from the Singapore market. This phenomenon directly reflects the PSA's "high threshold, strong regulation" approach. The FSMA primarily aims to address the PSA's shortcomings in cross-border business, market integrity, and law enforcement. As Singapore gradually became a regional crypto hub, a large number of overseas service providers offered Debit Payment (DPT) services to Singapore residents online. The FSMA was enacted, further expanding its regulatory reach. Its key provisions include: first, cross-border regulation, clarifying that even if a company operates overseas, as long as it provides services to Singaporean customers, it must comply with local laws and regulations, or face criminal or civil penalties; second, market integrity, granting the MAS greater power to combat market manipulation, misrepresentation, insider trading, and other activities to maintain market credibility; third, anti-money laundering and counter-terrorist financing, requiring both domestic and foreign service providers to comply with international standards and strengthen cross-border information disclosure and reporting mechanisms; and fourth, enforcement powers, granting the MAS the power to directly impose fines, injunctions, business restrictions, and even criminal prosecutions. These provisions have directly altered the industry landscape. On the one hand, some unlicensed overseas exchanges have been forced to withdraw due to their inability to legally reach Singaporean customers. On the other hand, licensed institutions are required to meet higher capital and transparency requirements, such as establishing more robust internal compliance systems and risk control frameworks. It is worth mentioning that some key provisions of the FSMA were implemented in stages after its release and all came into effect on June 30, 2025.

(III) Specific Rules

1. License

Singapore implements a strict licensing and permit management system for digital payment token service providers (DPTSPs), mainly based on the Payment Services Act 2019 (PSA) and its amendments, and the relevant provisions of Part 9 of the Financial Services and Markets Act 2022 (FSMA). DPT Licensing System under the PSA: According to the PSA, Category 6 "Digital Payment Token Services" has been formally brought under the regulatory scope. This category covers services such as the exchange between digital payment tokens and fiat currency, the exchange between tokens, token custody, wallet services, and intermediary matching. Institutions providing the above services must apply for one of the following two types of licenses: Standard Payment Institution (SPI): Applicable to small and medium-sized DPTSPs. Application requirements include being registered as a Singaporean company, having a local business location and a track record accessible to regulators, and having at least one member of management be a Singaporean citizen, permanent resident, or holder of an employment pass. Minimum registered capital is SGD 100,000, and risk management capabilities commensurate with the scale of the business must be demonstrated. Major Payment Institution (MPI) License: Suitable for businesses with high transaction volumes or involved in multiple payment services. This license has higher requirements, typically including larger capital reserves, segregation of client funds, and security mechanisms.

MAS further strengthened the application requirements in 2023. All companies applying for new licenses or changing licenses to add DPT services must submit a legal opinion issued by a professional law firm, which must clearly state the business model and whether the relevant services are subject to the PSA; at the same time, it must also be accompanied by a compliance assessment report completed by an independent external audit agency, covering business compliance and AML/CFT mechanisms. Expanded DTSP Regulation under FSMA Part 9 of the FSMA introduces a Digital Token Service Provider (DTSP) licensing regime, aiming to address gaps in the PSA's oversight of cross-border businesses. From June 30, 2025, any Singapore-registered company or institution with a physical presence in Singapore that provides digital token services to overseas clients will be required to apply for a DTSP license. MAS stated that these DTSP models pose high money laundering risks and are difficult to regulate, and therefore rarely approve such licenses, effectively closing the gray area of ​​regulatory arbitrage. Even in the rare cases in which licenses are issued, they must meet strict standards, including AML/CFT checks, cross-border information sharing, and technical and operational compliance.

Both the licensing systems under PSA and FSMA aim to ensure that digital payment token services operate under high regulatory standards in Singapore through high-threshold licenses, strict compliance requirements, and the prevention of regulatory arbitrage. These measures help maintain financial stability and market integrity, and also clarify the entry boundaries for legitimate operators.

2. Stablecoins

Singapore was the first country in the world to launch a dedicated stablecoin regulatory framework. In August 2023, MAS issued the "Regulatory Framework for Stablecoins", which came into effect in October 2024 in the form of amendments to the Payment Services Act (PSA) and supporting sub-laws. This framework is mainly aimed at "qualified stablecoins" (Single-Currency Stablecoins, SCS), aiming to ensure the security of user funds, improve transparency, and enhance market confidence.

According to MAS regulations, only stablecoins that meet the following conditions can be identified as "qualified stablecoins" (MAS-regulated Stablecoins):

• Anchor object: must be fully anchored and exchangeable at 1:1 with the Singapore Dollar (SGD) or a fiat currency that is a G10 currency;

• Issuer: limited to issuers incorporated and regulated in Singapore;

• Issuance scale: The circulation scale must reach/exceed S$5 million to be included in the scope of mandatory supervision;

• Payment attributes: It must be used primarily as a payment tool rather than a speculative investment token.

In order to ensure the redemption ability of stablecoins, regulators require that qualified stablecoins must have sufficient high-quality reserve assets:

• 100% reserve support: the total issuance amount must be fully supported by low-risk, highly liquid assets (such as cash and treasury bonds);

• Custody requirements: reserve assets must be deposited in a regulated financial institution (bank or custodian) and segregated from the issuer's own funds;

• Regular audits: Issuers are required to publish monthly reserve reports and have annual audits conducted by independent auditing firms to ensure adequacy and transparency.

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

• White paper disclosure: A detailed white paper must be published to explain the governance mechanism, reserve arrangements, liquidation and redemption rules;

• Risk warning: Clearly inform users that stablecoins are not risk-free and are subject to market liquidity and technical risks;

• Redemption obligation: A commitment must be made to redeem the stablecoin within a reasonable time (usually 5 working days)

• Prohibition on mixed issuance: The same institution may not issue both regulated and unregulated stablecoins to prevent investor confusion.

MAS's goal in promoting stablecoin regulation is to establish a "trusted stablecoin category" for the market. Qualified stablecoins will enjoy greater 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 requirements (such as tokens pegged to non-G10 currencies) may not be promoted as MAS-regulated stablecoins and may be subject to stricter advertising and usage restrictions.

3. Compliance and Reporting

In Singapore, digital asset service providers (DPTSPs) not only need to obtain a license, but must also comply with strict compliance and reporting obligations. These requirements are mainly derived from the Payment Services Act (PSA), the Financial Services and Markets Act (FSMA) and relevant guidelines of MAS, with emphasis on three aspects: KYC/AML process, transaction record retention, and suspicious transaction reporting.

DPT service providers are required to implement comprehensive customer due diligence (CDD) and continuous monitoring measures:

• ID verification (KYC): Before a customer opens an account or conducts large-scale transactions, the customer's identity must be verified and information such as name, address, and ID card must be collected (PSA §23, FSMA §36);

• Risk classification management: Service providers must adopt differentiated due diligence measures based on the customer's risk level (high-risk customers such as cross-border capital movers and politically exposed persons (PEPs);

• Continuous Monitoring: Continuously monitor the customer's trading patterns. If any abnormal trading patterns are found, investigation must be strengthened and records must be retained.

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

• Retention period: at least 5 years (PSA §47);

• Scope of records: including transaction date, amount, identity of counterparty, payment instrument, source and purpose of funds;

• Electronic archiving requirements: The use of electronic systems is permitted, but the authenticity, integrity and traceability of the data must be guaranteed.

According to Singapore's Drug Proceeds (Confiscation) Act (CDSA) and Terrorism (Suppression of Financing) Act (TFA), all DPT service providers have the obligation to report suspicious transactions:

• Trigger conditions: If the service provider knows or suspects that a transaction involves money laundering, terrorist financing or other illegal activities, it must submit a suspicious transaction report to the Financial Intelligence Agency of Singapore (STRO, Suspicious Transaction Reporting Office) within 15 working days;

• Criminal liability: If the report is not made as required, the institution and the person in charge may bear criminal liability (CDSA §39, TFA §8);

• International Cooperation: MAS shares some STR data with overseas regulators for cross-border law enforcement cooperation.

Through compliance and reporting mechanisms, Singapore ensures the transparency and traceability of the DPT market. KYC/AML processes can prevent anonymous transactions from concealing illicit capital flows; transaction record retention provides evidence for subsequent audits and regulatory investigations; and suspicious transaction reporting provides an early warning mechanism for combating cross-border money laundering and terrorist financing. The combination of these three has enabled Singapore to establish a relatively strict compliance baseline for crypto assets globally.

4. Investor Protection

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

MAS explicitly requires that DPT service providers shall not promote their services to the retail public by exaggerating benefits or through improper channels:

• Restricted channels: It is prohibited to promote DPT services in public places (such as subways, bus stations, shopping malls) or activities with high contact with the public;

• Promotional media: Gifts, raffles, airdrops, etc. shall not be used to attract public participation;

• Permitted channels: Information disclosure may only be made through the company's official website, mobile application or official social media page.

All DPT service providers must display risk warnings in a prominent position on the customer interface to ensure that investors understand the high-risk nature of digital assets:

• Prompt content: It must state that "cryptocurrency is not suitable for all investors, its value may fluctuate significantly and may result in total loss";

• Presentation method: The prompts must be clear and easy to see and must not be hidden in lengthy documents or small-print clauses;

• Special protection for retail investors: For first-time traders, service providers must conduct a risk assessment (suitability assessment) to confirm their risk tolerance.

DPT service providers must follow the principles of true, complete and non-misleading statements:

• Prohibited behaviors: Do not use misleading terms such as "guaranteed returns", "zero risk" and "principal protection";

• Information disclosure: Regarding product terms, fees, custody arrangements, clearing mechanisms, etc., a complete, accurate and easy-to-understand explanation must be provided;

• Consequences of violations: If misleading statements are provided, MAS has the right to revoke the license, impose heavy fines, and even pursue criminal prosecution in serious cases. The core logic of Singapore's investor protection mechanism lies in curbing inappropriate promotion, strengthening risk awareness, and ensuring truthful disclosure. In 2022, MAS specifically emphasized that crypto assets should not be promoted as a "shortcut to speculative wealth", and that market participants should be guided to rationally understand the risks. This series of measures has made Singapore one of the first jurisdictions globally to implement robust regulations on crypto-asset advertising and risk warnings, effectively mitigating the risk of retail investors suffering significant losses due to information asymmetry and market speculation. Overall, Singapore's regulatory approach consistently prioritizes compliance. Regulators have established a clear legal framework, supplemented by detailed implementation standards, systematically incorporating crypto-asset businesses into existing financial governance systems. International media and industry experts widely believe that this institutional arrangement has effectively enhanced market transparency and solidified Singapore's reputation as a global financial center for compliance. However, these high compliance requirements have also objectively driven some companies to relocate to jurisdictions with more relaxed regulations, such as Hong Kong or Dubai. As a result, Singapore has gradually established itself as a benchmark for strict regulation in the global crypto governance landscape: while this may inhibit market expansion and innovation in the short term, it will contribute to a stable, secure, and sustainable market environment in the long term. In summary, this section has systematically summarized the relevant laws and regulations and supervisory practices, clearly presenting the key points. 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 tax and regulatory framework for crypto asset governance. In terms of taxation, the government has consistently treated cryptocurrencies as non-legal tender, and therefore, income tax and Goods and Services Tax (GST) rules primarily apply to their daily use. Whether profiting from trading, paying for goods and services with tokens, or issuing and exchanging digital tokens, there are clear boundaries between taxable and tax-free holdings. Since Singapore does not have a capital gains tax, selling crypto assets solely due to appreciation in value is generally not taxed, keeping its tax landscape relatively simple.

  In terms of supervision, Singapore adheres to the idea of ​​compliance first. Through the legal system with the Payment Services Act (PSA 2019) and the Financial Services and Markets Act (FSMA 2022) as the core, it has established a licensing system, stablecoin management, compliance and reporting. The Monetary Authority of Singapore (MAS) ensures a highly transparent and accessible market through strict enforcement and ongoing guidance. While some companies may opt for more relaxed jurisdictions like Hong Kong or Dubai due to costs and restrictions, Singapore has earned global recognition for its exemplary high regulatory standards, providing institutional safeguards for the long-term sustainability of the market.

  Globally, Singapore's path highlights a combination of clear taxation and strict regulation: Compared to the fragmented regulation in the United States, the EU's gradual progress on the Markets in Crypto-Assets (MiCA) Regulation, and the UK's lagging stablecoin regulation, Singapore has established a more complete institutional framework. This high threshold may inhibit business expansion in the short term, but in the long term, through its transparent and stable institutional environment, it provides replicable experience for the integration of crypto assets into the traditional financial system.