Basic Research on Singapore’s Crypto Tax System and Supervision System (II)

4. Basic research on crypto supervision in Singapore

(I) Basic Framework

In recent years, Singapore has continued to strengthen and improve the standardized supervision of crypto assets, and has gradually formed a legal framework with the Payment Services Act 2019 (PSA) and the Financial Services and Markets Act 2022 (FSMA) as the core.The former establishes license management, anti-money laundering and anti-terrorism financing (AML/CFT) requirements and operational compliance obligations for digital payment token services (DPT services); the latter supplements market integrity, cross-border cooperation and law enforcement rights within the broader scope of financial services.The two laws are connected to each other, providing clear legal basis and compliance boundaries for the issuance, transaction, custody, payment and related services of crypto assets.

Under this framework, the Financial Administration (MAS) has significantly tightened the issuance of licenses and business behavior norms in recent years, supplemented by strict law enforcement.With the implementation of key licensing terms of FSMA this year, MAS requires all crypto companies that set up entities in Singapore but only serve overseas customers to obtain licenses within a time limit, otherwise they will face high fines and criminal liability; trading platform Tokenize Xchange announced its withdrawal from the Singapore market due to the licensing application blocked and turned its business to Malaysia and Abu Dhabi; at the same time, Binance chose to retain its local team to continue to promote license applications, while Bitget, Bybit, etc. are considering moving some operations to areas with relatively loose supervision.

(II) Key Articles

PSA is the first comprehensive regulation to systematically incorporate digital payment token (DPT) services. Its original intention is to deal with the payment and capital flow risks brought about by the rise of FinTech and crypto assets.

This law adopts the idea of ​​”supervision by function”, that is, no matter what the technical form is, as long as the capital flow and payment functions are involved, they are included in the scope of supervision.In terms of specific design, PSA classifies payment services, including a special category of “digital payment token service”, covering various business activities such as token and fiat currency exchange, token and 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 standard payment agency licenses and large payment agency licenses. The former is suitable for enterprises with smaller business scales, while the latter puts higher requirements on capital, risk control and compliance levels.To prevent systemic risks, PSA has also established strict compliance and business regulatory requirements, such as customer identity identification (KYC), anti-money laundering and anti-terrorism financing (AML/CFT) procedures, customer funding guarantees and isolation measures, prohibition of misleading publicity and market manipulation, and regular business and financial reports to the Monetary Authority of Singapore (MAS).In recent years, as the application threshold continues to tighten, most internationally renowned trading platforms (such as Binance, Bybit, Crypto.com, etc.) have been strictly reviewed in license applications, and some have even withdrawn from the Singapore market. This phenomenon directly reflects the PSA’s institutional orientation of “high threshold and strong supervision”.

FSMA is mainly used to make up for the shortcomings of PSA in cross-border business, market integrity and law enforcement.

As Singapore gradually becomes a regional encryption center, a large number of overseas service providers provide DPT services to Singapore residents through online methods. FSMA came into being, further expanding its regulatory tentacles.Its key clauses include: First, cross-border supervision, which clearly states that even if the company operates overseas, as long as it provides relevant services to Singapore customers, it must comply with local regulations, otherwise it will face criminal or civil penalties; Second, market integrity, giving MAS greater power to crack down on market manipulation, false statements, insider trading and other behaviors to maintain market credibility; Third, anti-money laundering and anti-terrorism financing, requiring domestic and foreign service providers to comply with international standards and strengthen cross-border information disclosure and reporting mechanisms; Fourth, law enforcement power, giving MAS the right to directly impose fines, prohibitions, business restrictions, and even criminal prosecutions.These terms directly change the industry structure. On the one hand, some unlicensed overseas exchanges were forced to withdraw because they could not legally reach Singapore customers. On the other hand, institutions that have obtained licenses had to bear higher capital and transparency requirements, such as establishing a more sound internal compliance system and risk control framework.It is worth mentioning that some key clauses in FSMA have been implemented in stages after their release, and have all taken effect as of June 30, 2025.

(III) Specific details

1. License

Singapore implements a strict licensing and licensing management system for digital payment token service providers (DPTSPs), mainly based on the Payment Services Act 2019 (PSA) and its amendments, as well as the relevant provisions of Part 9 in the Financial Services and Markets Act 2022 (FSMA).

DPT License System under PSA

According to PSA, the sixth category “digital payment token service” has been officially included in the scope of supervision. This category covers the exchange between digital payment tokens and fiat currencies, exchange between tokens, token custody, wallet services, intermediary matching and other businesses.Institutions that provide the above services must apply for one of the following two types of licenses:

• Standard Payment Institution (SPI): Suitable for small and medium-sized DPTSP.Application conditions include: registration as a Singaporean enterprise, having a local business premises and records available for regulatory inquiries, at least one management is a Singaporean citizen, permanent resident or hold an employment pass; the minimum registered capital is SGD100,000, and risk management capabilities commensurate with the business scale.

• Major Payment Institution (MPI): Suitable for enterprises with high transaction volume or involving multiple payment services.The license requirements are higher, usually including larger capital preparations, customer fund isolation, security guarantee mechanisms, etc.

MAS further strengthens the application requirements in 2023. All enterprises applying for a new license or changing license to increase DPT services must submit the application issued by a professional legal firm.Legal opinion, the content must clarify whether the business model and related services are subject to the jurisdiction of PSA; at the same time, it must also be accompanied by an independent external auditing agency.Compliance Assessment Report, covering business compliance and AML/CFT mechanisms, etc.

DTSP extension supervision under FSMA

FSMA’s Part 9 introduces a digital token service provider (DTSP) license system, aiming to fill the gap in PSA’s cross-border business regulation.Starting from June 30, 2025, any organization that registers a Singapore company or has a substantial operating location in Singapore and provides digital token services to overseas customers must apply for a DTSP license.

MAS said that this type of DTSP model has high risks of money laundering and difficult supervision, so it is almost impossible to approve such licenses, which actually plays a role in blocking the gray space for regulatory arbitrage.Even if a license is issued in rare cases, it must strictly comply with a series of standards including AML/CFT inspection, cross-border information sharing, technology and business compliance.

Whether it is the licensing system under PSA or FSMA, both aim to ensure that digital payment token services operate in Singapore under high standards of supervision through high threshold licenses, strict compliance requirements, and prevent regulatory arbitrage.These measures help maintain financial stability and market integrity, and also clarify the access boundaries of legal operators.

2. Stable Coin

Singapore was the first in the world to launch a special stablecoin regulatory framework, and in August 2023, the Regulatory Framework for Stablecoins was released by MAS, which will be implemented in October 2024 in the form of amending the Payment Services Act (PSA) and the supporting sub-law.This framework is mainly aimed at “Single-Currency Stablecoins” (SCS), aiming to ensure the security of user funds, improve transparency, and enhance market confidence.

According to the MAS regulations, only stablecoins that meet the following conditions can be considered “MAS-regulated Stablecoins”:

• Anchor objects: Must be fully anchored and exchanged 1:1 for Singapore Dollars (SGD) or fiat currency belonging to G10 currencies;

• Issuer: Only issuers incorporated and regulated in Singapore;

• Issuance scale: The circulation scale must reach/more than S$5 million before it will be included in the scope of mandatory supervision;

• Payment attributes: It must be used mainly as a payment tool, rather than speculative investment tokens.

In order to ensure the repayment capacity of stablecoins, regulatory requirements require qualified stablecoins to have sufficient high-quality reserve assets:

• 100% reserve support: The total issuance must be completely supported by low-risk, high-liquid assets (such as cash, Treasury bills);

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

• Regular audits: The issuer must disclose the reserve report every month and conduct an annual audit by an independent audit agency to ensure full and transparent amounts.

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

• White paper disclosure: Detailed white papers need to be released to explain the governance mechanism, reserve arrangements, liquidation and redemption rules;

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

• Redemption obligation: You must promise to cash out at 1:1 within a reasonable time (usually within 5 working days);

• Prohibited mixed issuance: The same institution shall not issue regulated and unregulated stablecoins at the same time in order to prevent confusing investors.

MAS’s goal of promoting stablecoin regulation is to establish a “trusted stablecoin category” for the market.Qualified stablecoins will enjoy higher recognition in payment systems and financial applications, and MAS plans to allow these stablecoins to interoperate with traditional electronic payment systems.In contrast, stablecoins that do not meet the conditions (such as tokens anchored to non-G10 currencies) shall not be advertised as stablecoins under MAS regulation and may be subject to stricter advertising and usage restrictions.

3. Compliance and Reporting

In Singapore, crypto asset service providers (DPTSPs) must not only obtain licenses, but also comply with strict compliance and reporting obligations.These requirements mainly come from the relevant guidelines of the Payment Services Act (PSA), the Financial Services and Markets Act (FSMA) and MAS, and are reflected in theKYC/AML Process,Save transaction history,Suspicious transaction applicationReportThree aspects.

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

• Identity verification (KYC): Before a customer opens an account or conducts large-scale transactions, he or she must verify the identity of the customer and collect information such as name, address, identity documents (PSA §23, FSMA §36);

• Risk hierarchical management: Service providers need to take differentiated due diligence measures based on customer risk levels (high-risk customers such as cross-border capital flows, political public figures PEPs);

• Continuous monitoring: Continuous monitoring of the customer’s trading model. If abnormal trading model is found, investigations must be strengthened and records must be retained.

All transactions and customer information related to DPT must be kept in full records for future regulatory review or enforcement:

• Year of storage: at least 5 years of storage (PSA §47);

• Record scope: including transaction date, amount, counterparty identity, payment instrument, fund source and purpose description;

• Electronic archiving requirements: electronic system is allowed to be saved, but the authenticity, integrity and traceability of the data must be ensured.

Under the Singapore Drug Trafficking Income (Confiscation) Act (CDSA) and the Terrorism (Suppression of Financing) Act (TFA), all DPT service providers are obliged to declare 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 Singapore Financial Intelligence Agency (STRO, Suspicious Transaction Reporting Office) within 15 working days;

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

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

Through compliance and reporting mechanisms, Singapore ensures transparency and traceability of the DPT market.The KYC/AML process can prevent anonymous transactions from covering up illegal capital flows; transaction records are kept to provide evidence for subsequent audits and regulatory investigations; and suspicious transaction declarations provide an early warning mechanism for combating cross-border money laundering and terrorist financing.The combination of these three has enabled Singapore to establish a strict crypto asset compliance baseline worldwide.

4. Investor protection

In Singapore, financial regulators pay attention not only to financial stability and compliance obligations, but also attach great importance to crypto assets related toInvestor protection.The core requirements are reflected inAdvertising restrictions,Risk warning obligation,Misleading statements are prohibitedThree aspects.These mainly come from the Financial Services and Markets Act (FSMA 2022), the Payment Services Act (PSA 2019) and the special guidelines issued by MAS (especially the MAS 2022 “Digital Payment Token Service Provider Advertising Guidelines”).

MAS clearly requires that DPT service providers are not allowed to promote their services to the retail public through exaggerated revenue or improper channels:

• Restricted channels: Prohibit the promotion of DPT services in public places (such as subways, bus stations, shopping malls) or activities with high contact with the public;

• Propaganda media: Gifts, lottery, airdrops, etc. are not allowed to attract public participation;

• Allowed channels: Information disclosure can only be made through your own official website, mobile app or official social media pages.

All DPT service providers must display risk warnings in prominent positions on the client interface to ensure investors understand the high-risk characteristics of digital assets:

• Tips: It is necessary to state that “cryptocurrencies are not suitable for all investors, and their value may fluctuate significantly and may result in full loss”;

• Presentation method: The prompts must be clear and easy to see, and must not be hidden in lengthy documents or small font terms;

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

DPT service providers must follow the principle of truthful, complete and unmisleading statements:

• Prohibited behavior: Misleading words such as “guaranteed return”, “zero risk”, and “guaranteed capital” shall not be used;

• Information disclosure: It involves product terms, fees, custody arrangements, liquidation mechanisms, etc., and must provide complete, accurate and easy-to-understand explanations;

• Consequences of violation: If a misleading statement is provided, MAS has the right to revoke the license and impose a high fine, and in serious cases, even criminal liability is pursued.

Singapore investor protection mechanismThe core logic isSuppress improper promotion+Strengthen risk awareness+Ensure true disclosure.In 2022, MAS specifically emphasized that crypto assets are not allowed to be promoted as a “shortcut to speculation” and should guide market participants to rationally recognize risks.This series of measures has made Singapore a globalOne of the first jurisdictions to vigorously regulate crypto asset advertising and risk warnings, effectively reducing the risk of retail investors suffering major losses due to information asymmetry and market speculation.

Overall, Singapore’s regulatory orientation always reflects the logic of compliance priority.The regulatory authorities have established a clear legal framework, supplemented by detailed enforcement standards, and systematically incorporate crypto asset business into the existing financial governance system.International media and the industry generally believe that this institutional arrangement has effectively improved market transparency and consolidated Singapore’s reputation as a global financial center for compliance.But at the same time, high-threshold compliance requirements have also objectively prompted some companies to move to more relaxed jurisdictions, such as Hong Kong or Dubai.As a result, Singapore has gradually formed a benchmark image of strict regulation in the global crypto governance pattern: it may curb market expansion and innovation vitality in the short term, but it will help shape a stable, safe and sustainable market environment in the long term.In short, this section has systematically summarized relevant regulations and regulatory practices, and the key context has been clearly presented. For more detailed terms, please refer to the original text of PSA and FSMA.

V. Conclusion

Overall, Singapore has formed a relatively complete dual framework of taxation and regulatory in crypto asset governance.

In terms of taxation, the government has always insisted on treating cryptocurrencies asIllegal currency, therefore, the income tax and goods and services tax (GST) rules are mainly applicable to daily use: whether it is profitable through transactions, paying for goods and services in tokens, or issuing and exchanging digital tokens, there are clear boundaries of taxable and tax-free.Since Singapore does not have capital gains tax, selling simply because of appreciation of holding crypto assets usually does not pay tax, which keeps it relatively simple in taxation.

In terms of regulation, Singapore insistsCompliance priorityThe idea of ​​the law was established through the legal system with the core “Payment Services Act” (PSA 2019) and the Financial Services and Markets Act (FSMA 2022)License system,Stablecoin management,Compliance and reportingtell,Investor protectionetc.The Monetary Authority of Singapore (MAS) ensures that the market operates under high transparency and high threshold conditions with strict law enforcement and continuous guidance.Although some companies have chosen to switch to relatively loose judicial districts such as Hong Kong or Dubai due to costs and restrictions, Singapore has won global recognition with its model image of high-standard regulation, providing institutional guarantees for the long-term sustainable development of the market.

Looking around the world, Singapore’s path highlightsTax clear,Strict supervisionThe combination model: Compared with the fragmented regulatory process in the United States, the EU is still gradually advancing the Crypto Assets Market Ordinance (MiCA), and the UK’s lag in 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 run, it provides replicable experience for the inclusion of crypto assets into the traditional financial system through a transparent and stable institutional environment.