Singapore's Web3 Regulatory Shift: From Encouraging Innovation to Risk Prevention

In recent years, Singapore, as a popular hub for global virtual currency and Web3 enterprises, is experiencing a significant shift in regulatory direction. From the early encouragement of innovation to the current risk management, this city-state is gradually improving its Web3 regulatory framework.

In the early development of the Web3 industry, Singapore adopted an open attitude. The Payment Services Act, enacted in 2019, provided a clear legal framework for digital payment token services, attracting numerous Web3 projects to establish themselves. At that time, the regulatory environment could be described as a "window period"; as long as companies did not cross the compliance bottom line, they could boldly experiment with various innovations.

However, as the industry scales up, potential risks gradually become apparent. In 2022, several major events such as the collapse of Three Arrows Capital and the failure of FTX triggered heightened vigilance from regulatory authorities. In order to maintain the reputation of its financial center, Singapore quickly took action to strengthen the regulation of cryptocurrency service providers while also limiting retail investment.

For retail investors, the new regulations have significantly tightened the investment space. Cryptocurrency service providers are prohibited from offering any form of rewards or risk amplification features to retail investors, and they even need to assess users' risk tolerance and set investment limits. This indicates that Singapore favors rational investors rather than speculators seeking high-risk returns.

Service providers also face stricter scrutiny. By June 30, 2025, all businesses that have not obtained a digital token service provider license will be required to stop providing services to overseas clients. Currently, only a few leading companies have been approved or are in an exempt status, while the rest may need to shift elsewhere or rush to comply.

The field of fund management is also tightening. Even if only serving "qualified investors," cryptocurrency funds must have sound risk control, client asset management, and anti-money laundering mechanisms. This means that the era of funds operating solely based on individual reputation and concepts is over.

This wave of regulatory upgrades has sparked different opinions. Some believe that Singapore is no longer the ideal place for Web3, while another viewpoint holds that this is a necessary path for the market to mature. The stance of the Monetary Authority of Singapore is clear: it welcomes responsible innovation but will not tolerate the abuse of trust.

However, there are also views that the Web3 industry is still in its early stages of development, and imposing strict regulations too early may stifle potential innovation. Striking a balance between promoting innovation and controlling risks will be an ongoing challenge for Singapore.

Overall, Singapore's regulatory shift reflects its determination to establish a more mature and stable Web3 ecosystem. While speculative activities may be restricted, Singapore remains one of the most attractive markets globally for teams with genuine technological capabilities and long-term development plans.