Unlicensed Singapore-based businesses dealing with offshore cryptocurrency clients must cease operations or secure a license, otherwise they will face penalties
The Monetary Authority of Singapore (MAS) has tightened its regulatory grip on offshore crypto and stablecoin firms operating in the city-state. The new regulations, implemented under the Payment Services Act (PSA), aim to address the challenge of supervision when companies have their main operations outside of Singapore.
Licensing Requirement
All digital token service providers (DTSPs), including offshore firms offering services in Singapore, must secure a MAS-regulated license to operate legally starting from June 30, 2025. Failure to comply can result in fines up to SGD 250,000 and imprisonment for up to three years.
Types of Licenses Applicable
Two types of licenses are applicable:
- Digital Payment Token (DPT) Service License: Required for firms issuing or dealing in digital payment tokens, including crypto exchanges and wallets.
- Stablecoin Issuance Service License: Mandatory for stablecoin issuers, especially for SGD or G10 currency-pegged stablecoins. Issuers with over SGD 5 million in circulation must hold a Major Payment Institution (MPI) license covering both DPT service and stablecoin issuance.
Operational Requirements and Compliance
Firms must comply with KYC (know your customer) and AML/CFT (anti-money laundering / combating the financing of terrorism) regulations. They must also adhere to MAS Notice PSN02, travel rule compliance, risk management processes, and retail trading restrictions.
Technology infrastructure and security controls must meet MAS standards, and founders or key personnel must pass fit-and-proper assessments. Retail investors face new protections, including restrictions on lending and staking services offered by crypto firms.
Stablecoin Specific Rules
Only MAS-regulated stablecoins (those pegged to SGD or G10 currencies and issued under MAS licenses) can be legally issued in Singapore by banks or non-bank entities. Offshore stablecoin issuers need to establish a local presence or comply with licensing requirements to operate.
Stablecoin issuers with less than SGD 5 million in circulation may only require DPT licenses but can opt for stablecoin issuance service licenses for higher regulatory standing.
Offshore Firms
Offshore firms must comply similarly and obtain MAS approval to provide services to Singapore users. Without a license, they cannot legally operate or solicit business in Singapore. The MAS enforces a strict licensing regime that treats onshore and offshore providers under the same regulatory umbrella once services target Singapore residents.
MAS's Warning and Concerns
MAS warned in its October consultation that there would not be a lengthy transition period, encouraging firms to bring operations onshore and obtain a license or leave Singapore altogether. The authority is concerned about the potential for money laundering by firms that register in Singapore for tax purposes but don't provide services within Singapore or have a material presence.
These firms, incorporated in Singapore, must cease operations by the end of June 2025 or obtain a license, which MAS states will be granted rarely. The Monetary Authority of Singapore (MAS) has announced the results of its latest consultation affecting Singapore crypto and stablecoin firms operating offshore.
Effective regulation of offshore-focused firms becomes nearly impossible without Singapore touchpoints. Therefore, service providers active in Singapore must be licensed in accordance with the Payment Services Act.
- Offshore crypto and stablecoin firms operating in Singapore must secure a MAS-regulated license by June 30, 2025, as stipulated under the Payment Services Act (PSA), or face fines and imprisonment.
- The new regulations also specify two types of licenses: Digital Payment Token (DPT) Service License for firms dealing with digital payment tokens, and Stablecoin Issuance Service License for stablecoin issuers, particularly those pegged to SGD or G10 currencies.
