Singapore Tightens Crypto-related Regulations, Prompting Exodus to Hong Kong and Dubai

The Monetary Authority of Singapore (MAS) has introduced stringent new regulations for Digital Token Service Providers (DTSPs), signaling a dramatic shift in the city-state’s approach to the Web3 industry.

The new rules, detailed in a response document released on May 30, 2025, are set to take effect on June 30, 2025, with no buffer period, leaving many Web3 firms scrambling to reassess their operations.

RWA Strategy Lead of Pharos Network @bocaibocai_ warns that this could trigger a mass exodus of Web3 businesses from Singapore to more welcoming hubs like Hong Kong and Dubai.

MAS Cracks Down on DTSPs: What the New Rules Mean

Under the updated Financial Services and Markets Act (FSM Act), the definition of DTSPs has been expanded to include:

(i) individuals or partnerships operating from a place of business in Singapore

(ii) Singapore-registered corporations providing digital token (DT) services outside Singapore, regardless of their origin.

According to section 137 of the FSM Act, any entity or individual engaging in DT services—whether targeting local or overseas clients—must obtain a DTSP license if they operate from a "place of business" in Singapore.

The MAS has defined a "place of business" broadly, encompassing "any location used by the licensee for carrying on its business," including mobile stalls, which significantly widens the regulatory net. This means that even remote work arrangements could fall under scrutiny.

The MAS has also clarified that activities such as sales or business development conducted in shared offices could be interpreted as operating a "place of business," subjecting individuals to licensing requirements.

Even more concerning is the expansive definition of "digital token services," which includes not only direct sales or offerings but also the publication of research reports or advice related to digital tokens. This could potentially affect content creators, KOLs (key opinion leaders), and analysts, who may now require a DTSP license to publish token-related content while in Singapore.

The MAS has adopted an "extremely cautious" stance on issuing new DTSP licenses, stating that approvals will only be granted in "extremely limited circumstances." This hardline approach has led many to describe the new regulations as a "cliff-edge" tightening of Singapore’s once crypto-friendly environment, effectively ending the era of regulatory arbitrage that had attracted Web3 giants like Three Arrows Capital and FTX to the city in the early 2020s.

Key Concerns and Clarifications: What Web3 Stakeholders Are Asking

The new regulations have sparked widespread concern among Web3 stakeholders, prompting questions about their implications. Here are some of the most pressing issues, along with insights based on feedback from the MAS and legal experts:

• Can individuals work remotely for overseas Web3 companies from Singapore? The MAS has clarified that employees of foreign-registered companies providing DT services overseas are generally exempt from the licensing requirement if they work from home. However, the definition of "employee" remains vague—project founders or shareholders may not qualify, leaving room for discretionary enforcement by the MAS.

• What constitutes a "place of business"? The broad definition includes any location used for business activities, even shared workspaces. For example, a business development representative meeting clients in a co-working space could be deemed to be "carrying on a business," triggering the need for a license.

• Are CT KOLs and influencers at risk? The inclusion of research reports and advice in the definition of DT services has raised alarms. An indie researcher posting crypto analysis in Singapore could theoretically be required to obtain a DTSP license, though the MAS has not provided clear guidance on how this will be enforced.

• What happens to unlicensed entities? Unlicensed individuals or companies risk being "bombed out" of Singapore, as one industry observer put it. The MAS’s enforcement strategy is likely to be case-by-case, with some expecting high-profile crackdowns to set a precedent.

Hong Kong: A Potential Safe Haven Amid Regulatory Ambiguity

As Singapore tightens its grip, some Web3 firms are looking to Hong Kong as a potential destination.

On June 4, 2025, the Hong Kong Securities and Futures Commission (SFC) announced plans to explore virtual asset derivatives trading for professional investors, supported by strong risk controls to ensure market safety and transparency. On May 21, Hong Kong passed the Stablecoin Licensing Bill, establishing a legal framework for fiat-backed stablecoins.

Despite these advancements, Hong Kong has struggled to generate significant buzz in the global Web3 community, with many firms remaining cautious about the city’s regulatory pace.

Johnny Ng, a Hong Kong Legislative Council Member, commented on the situation in Singapore, stating, “Since Hong Kong released its virtual asset policy statement in 2022, the city has welcomed the industry’s development. According to unofficial statistics, thousands of Web3 companies have established a presence in Hong Kong. If you are considering relocating your headquarters and team to Hong Kong, I would be happy to assist and provide relevant information. You are most welcome to develop your business in Hong Kong!”

The current regulatory clampdown in Singapore may drive a wave of companies to relocate to Hong Kong, which offers a more predictable environment bolstered by its established financial infrastructure.

Dubai: The New Capital of the Web3 Nation?

On the other hand, Dubai has emerged as a frontrunner for Web3 firms seeking a more permissive regulatory environment.

Dubai’s Virtual Assets Regulatory Authority (VARA) offers a forward-looking framework that supports decentralized structures like DAOs operating outside the UAE. Unlike traditional models, VARA permits such firms to operate locally if they provide adequate oversight data, balancing innovation with compliance. Its licensing process for virtual asset businesses is also notably streamlined.

In 2025, Dubai boosted its Web3 efforts with government incentives, offering 100% subsidies for early-stage startups and 50% for growth-phase ones that showcase innovative tech and large user potential. This supports Dubai’s strategy to attract global talent and drive blockchain innovation. Additionally, the February 2025 launch of Crypto Tower—a hub for blockchain and Web3 firms—offers subsidized offices, incubation, and blockchain-based tenant services.

Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, had the city’s commitment to Web3, stating, “Dubai is fully committed to leading the global Web3 revolution, providing a nurturing environment for blockchain innovation to thrive.”

With its strategic location, advanced infrastructure, and pro-Web3 policies, Dubai is increasingly seen as the go-to destination for firms fleeing Singapore’s regulatory crackdown.