Blockchain makes steady advance in Singapore amid enhanced regulatory clarity

December 2024 marked a historic moment for Bitcoin as it surged past the US$100,000 mark for the first time, driven by the approval of spot Bitcoin exchange-traded funds, or ETFs, by the US Securities and Exchange Commission and anticipation of regulatory changes with a new administration taking office in the White House.

In the same month, the tokenised real-world asset market had grown by about 85% year-on-year to reach US$15.2 billion. Traditional asset classes such as private credit, commodities, real estate and treasuries have become increasingly tokenised, reflecting confidence in blockchain’s ability to enhance liquidity and accessibility.

Private sector developments

Singapore’s digital asset ecosystem expanded considerably in 2024 and this looks set to continue as 2025 progresses, especially in relation to the adoption of stablecoins and crypto payments. Merchant services in Singapore received nearly US$1 billion in crypto payments in the second quarter of 2024, demonstrating increasing consumer and business adoption.

In September 2024, crypto payment firm Triple-A announced a partnership with DCS Card Centre to enable DCS cardmembers to top up their virtual accounts with five digital assets, including Bitcoin, Ether and USDC.

The Monetary Authority of Singapore (MAS) also accelerated the pace of crypto licensing. As of end-November 2024, the regulatory body issued a record 13 digital payment token (DPT) licences in 2024, bringing the then-total licensees to 29.

New licensees included several major players in the stablecoin ecosystem. Some of the licensees are seeking to gain, or have gained, approval from MAS to issue single-currency stablecoins compliant with MAS’ stablecoin regulatory framework. Crypto exchange OKX, whose Singapore subsidiary received a DPT licence in September 2024, has also announced instant SGD-denominated deposits and withdrawals in Singapore to facilitate fiat-to-crypto transactions.

MAS projects

In the past two years, MAS has worked with financial institutions to pilot promising asset tokenisation use cases under Project Guardian. Following successful industry trials, MAS announced that workstreams would be set up for three asset classes – fixed income, the foreign exchange market and asset and wealth management – with the aim of developing working standards and frameworks. Financial institutions that participated in the trials are now looking to commercialise their respective asset tokenisation trials.

MAS’ push for asset tokenisation has been supported by its Global Layer 1 (GL1) initiative, the first phase of which concluded in June 2024. GL1’s goal is to develop a global shared-ledger infrastructure that works across different classes of tokenised financial assets. The second phase will focus on refining policies and standards for the infrastructure.

Regulated and credible forms of tokenised money are needed as common settlement assets to promote confidence in the settlement of tokenised assets in financial markets. In November, MAS announced the establishment of a test network, SGD Testnet, which facilitates financial institutions’ access to common settlement assets including Singapore dollar-denominated wholesale central bank digital currency (CBDC) for market testing purposes. SGD Testnet will be made available to eligible participants of Project Guardian and Project Orchid.

At the Singapore Fintech Festival 2024 in November, outgoing MAS chief Ravi Menon identified four building blocks to the use of digital currencies – settlement ledger, tokenisation bridge, programmability protocol and name service. MAS will add four more trials to Project Orchid, which focuses on programmable money. Trial participants include OCBC Bank, UOB, Ant International, Grab and others.

Developing workable cross-border payments infrastructure is a key element of MAS’ strategy to become a regional payments hub. In October 2024, the Bank for International Settlements and its central bank partners announced Project Mandala was a success. The project aims to improve the speed and efficiency of cross-border transactions by automating compliance procedures. The project has reached proof-of-concept stage.

Regulatory updates

Amendments to the Payment Services Act 2019 (PSA) and its accompanying regulations took effect in two tranches in 2024. These changes expanded the scope of payment services regulated by MAS and introduced stronger segregation and custody requirements for DPT service licensees. Crucially, the provision of custodial services for DPTs and the facilitation of the transmission or exchange of DPTs are now regulated by the PSA.

MAS has also released a finalised set of guidelines on the provision of consumer protection safeguards by DPT service providers. The guidelines set out MAS’ expectations on measures that should be taken by DPT service licensees to safeguard customers’ assets, disclose risks to retail customers, and deal with conflicts of interest. The guidelines take effect in two stages in April 2024 and June 2025.

FSMA implementation and proposals

The Financial Services and Markets Act 2022 (FSMA), which consolidates MAS’ regulatory powers in the financial sector, has been implemented in phases since 2023. The FSMA regulates digital token service providers (DTSPs) – entities based or incorporated in Singapore that provide a digital token service outside Singapore. In October 2024, MAS released a consultation paper on its proposed regulatory approach for DTSPs. The proposed regulations cover the following areas:

• Processes and timelines for licence application. DTSP licences will be granted on a perpetual basis, with licence fees payable on an annual basis.
• DTSPs’  minimum initial and ongoing financial requirements. DTSPs that are corporations, partnerships or limited liability partnerships will be required to maintain a base capital or total capital contribution of S$250,000, as the case may be. For individuals that are DTSPs, the same value must be maintained with MAS as security in the form of a cash deposit.
• Anti-money laundering and countering the financing of terrorism (AML/CFT) requirements. Licensees will be required to implement a suite of AML/CFT measures including customer due diligence (CDD) policies and controls, transaction monitoring and suspicious transactions reporting.
• Reporting requirements, technology risk management and cyber hygiene. DTSPs will be required to notify of suspicious activities and incidents of fraud, submit periodic regulatory returns, mitigate operational risks to critical infrastructure and implement cyber security measures.

Outside the financial services sector, regulatory requirements built on decentralised architecture continue to take shape, with the government pushing ahead with plans to fully integrate distributed ledger technology across the bunkering value chain. 

During the Singapore International Bunkering Conference in October 2024, the Marine and Port Authority of Singapore (MPA) announced that bunker suppliers will be required, from April 2025, to provide digital bunkering services and issue electronic bunker delivery notes, or e-BDNs, as a default. 

The MPA has adopted a “whitelisting” approach for digital bunkering solution providers to ensure conformance to cybersecurity, functional and regulatory reporting requirements.

Technical developments

Cross-chain interoperability refers to the ability of different blockchain networks to communicate, share data, and transfer assets seamlessly. Since blockchains are often siloed with unique protocols, improving interoperability can enhance efficiency, liquidity, and functionality across decentralised systems. 

In October 2024, the Inter-Blockchain Communication (IBC) protocol reported it had connected 117 blockchains, while the LayerZero protocol followed closely with 93 chains.

Reducing transaction costs on the chain is essential for the commercial scalability of blockchain technology. Layer 2 solutions seek to achieve this by processing transactions off-chain before finalizing them on the main layer 1 blockchain. 

Notable layer 2 technologies include zero-knowledge rollups (ZK-rollups) and optimistic rollups (OR). Base, an OR-based layer 2 solution built by Coinbase, has reportedly emerged as the fastest-growing solution in 2024, capturing 28% of all new startup activity within its first year.

With over 45% of new blockchain startups focusing on enhancing blockchain scalability and infrastructure and with the total value locked in layer 2 solutions exceeding US$31 billion in 2024, the layer 2 ecosystem is expected to mature and continue to shape the broader adoption of blockchain technology in the coming years.

Osborne Clarke comment

As the blockchain landscape continues to develop, its integration into mainstream industries is expected to deepen over the next few years. Enhanced regulatory clarity, especially in relation to crypto service providers in Singapore, may encourage greater adoption across financial services, supply chain management and digital identity solutions. Singapore is expected to continue calibrating its regulatory approach to address evolving stakeholder concerns.

With growing institutional interest and the emergence of viable use cases and infrastructure for asset tokenisation, blockchain is now better positioned than ever to drive the next phase of digital transformation.

Bryan Tan, a trainee solicitor with OC Queen Street, assisted writing this Insight.