Singapore positioned itself as Asia’s premier crypto hub from 2019-2022, attracting hundreds of blockchain companies through the Monetary Authority of Singapore’s (MAS) progressive licensing framework. But after the Terra/Luna collapse and FTX blowup — both of which had significant Singapore connections — the city-state dramatically tightened its approach.
The Payment Services Act (PSA), revised in 2023, created one of the world’s strictest retail crypto regulatory frameworks. Licensed exchanges must segregate customer assets, maintain risk reserves, and restrict services like lending and staking for retail users. These requirements exceeded what the US, EU, or Japan demanded at the time.
Three Arrows Capital (3AC), the hedge fund that spectacularly imploded in June 2022, was based in Singapore. Its founders, Su Zhu and Kyle Davies, had operated with minimal oversight. The 3AC collapse — which caused billions in losses across the industry — was a wake-up call for Singaporean regulators who had been praised for their light-touch approach.
FTX’s Singaporean entity and Temasek’s $275 million investment in FTX (later written down to zero) further embarrassed the ecosystem. The fact that a sovereign wealth fund had been burned by a crypto fraud intensified political pressure to crack down on the industry.
MAS responded with what they called “calibrated regulation.” Rather than banning crypto outright, they made licensing requirements so demanding that only well-capitalized, compliant companies could operate. By mid-2024, fewer than 20 companies held major payment institution licenses for crypto activities.
The impact on the ecosystem was mixed. Large, compliant companies like Coinbase, Crypto.com, and Independent Reserve secured licenses and expanded Singaporean operations. Smaller startups and DeFi-focused companies relocated to Dubai, Hong Kong, or Switzerland, finding Singapore’s requirements too onerous.
Singapore’s approach represents the “grown-up” model of crypto regulation — not hostile, but setting the bar high enough that only serious players can participate. Whether this leads to a healthier, more sustainable industry or simply drives innovation elsewhere is the central question of crypto regulation globally.
Leave a Reply