PURPOSE-BUILT CRYPTO LAW: IMPERATIVE OR A MATTER OF CHOICE?

Introduction

Singapore has long positioned itself as a forward-thinking hub for global finance and innovation. The republic has also earned international accolades for its pragmatic and innovation-friendly approach to digital finance. The Payment Services Act (PS Act), Securities and Futures Act (SFA), and the Financial Services and Markets Act (FMSA) are three notable statutes that aim to provide a clear framework for businesses dealing in cryptocurrency (or digital tokens/digital payment tokens) in Singapore.

Among other things, the PS Act, the SFA and the FMSA regulate a wide spectrum of crypto-related activities. The PS Act licenses Digital Payment Token (DPT) service providers, covering custody, exchange, and transmission of cryptocurrencies. The SFA governs crypto assets that qualify as capital market products, such as security tokens. The FMSA, on the other hand, regulates Singapore-incorporated companies that provide digital asset services to foreign customers exclusively- an activity which was previously not addressed under the PS Act and the SFA.

Regulated but not recognised?

The PS Act, the SFA and the FMSA affirm that cryptocurrency is a legitimate thing in Singapore, subject to rigorous compliance standards including AML/CFT obligations, licensing, and consumer protection. However, a curious contradiction arises when digital assets interact with more traditional and long-established financial activities, such as pawnbroking.

It is noteworthy of mention from the outset that Singapore’s Pawnbrokers Act was enacted in 2015, before cryptocurrency made headways in Singapore. In other words, the Singapore lawmakers may not have contemplated the role of cryptocurrency, especially the likes of Bitcoin (BTC), Ether (ETH), Non-Fungible Tokens (NFTs), etc and how the Singaporean Courts recognised digital assets as valuable property. Herein lies the contradiction.

Under Section 3(1) of the Pawnbrokers Act (2015) a “pledge” is defined as “goods that are taken into possession by a lender of money as security for the repayment of a loan.” In the context of licensed pawnbroking, digital assets (BTC, ETH and NFTs) that exist as data on a decentralised ledger may not meet the legal and factual criteria for tangible, movable goods that can be taken into possession, even if stored on a physical cold wallet. A licensed pawnbroker would contravene the Pawnbrokers Act (2015) and risk having his operating licence revoked if digital assets were accepted as a pledge. This prohibition exists even though digital assets are fully regulated under the FMSA, PS Act and SFA, thus creating an inconsistency in the treatment of digital assets and a regulatory “blind spot.”

From a commercial standpoint, this inconsistency in the laws potentially stifles business and entrepreneurs exploring the traditional pawnbroking business as digital assets (especially BTC) are increasingly recognised as valuable property by the Singapore courts. At a broader level, this particular inconsistency exposes the limits of Singapore’s incremental approach towards regulating digital assets. Arguably, a purpose-built cryptocurrency law tailored to the unique characteristics of digital assets is urgently needed to resolve these tensions and other issues that could arise in the rapidly changing cryptocurrency sector.

Limitations of Singapore’s Incremental Approach

As with other commonwealth countries, Singapore’s legal and regulatory mode vis-à-vis cryptocurrency can be described as incremental and modular. This approach essentially layers new frameworks (like the PS Act and FSMA) atop existing laws. This incremental approach has allowed the Monetary Authority of Singapore (MAS), being Singapore’s Central Bank and the financial regulator, to respond quickly to emerging risks while maintaining flexibility. Nonetheless, as seen in the case with the Pawnbrokers Act (2015), the incremental approach could result in regulatory silos.

To elaborate further, licensed pawnbrokers are regulated by the Ministry of Law, through the Registry of Pawnbrokers, whereas licensees under the FMSA, PS Act and SFA are supervised by the MAS. The upshot of this is a legal fragmentation, inconsistency and possible confusion, where cryptocurrency is regulated as a payment instrument (under the PS Act) but not a pledgeable property under the Pawnbrokers Act (2015), even though Singapore courts have recognised cryptocurrency as property. Why should there be a different treatment of the same digital asset, one may ask.

Implications

This legal inconsistency can result in other consequences.

The most glaring impact is on entrepreneurship. According to one report, 28% of Singapore’s population holds digital assets. This was a rise from “26% in 2024, placing the city-state ahead of traditionally strong markets like the UK, US, and Australia.” The increasing growth in crypto adoption suggests that digital assets are seen as an investment instrument, with investors holding digital assets with the hope that the prices of these assets will appreciate. Crypto-pawnbroking is arguably a viable retail business, offering short-term loans (if needed) for investors, without requiring them to liquidate their digital assets. Unfortunately, this potential diversification for the traditional pawnshop remains unavailable by the operation of Section 3(1) of the Pawnbrokers Act (2015).

Relatedly, the restrictions arising from the aforesaid statutory provision would force would-be entrepreneurs and investors to other jurisdictions that permit crypto-pawnbroking under the existing pawnbroking license, adversely affecting Singapore’s business competitiveness.

Making a Case for a Bespoke Crypto Law

To resolve the inconsistency between the PSA, SFA, and the Pawnbrokers Act (2015) and local jurisprudence on cryptocurrency, consider a unified and purpose-built legislation, tailored to the unique characteristics of digital assets. Among other things, the proposed crypto law should (a) define the proprietary nature of digital assets; (b) create a licensing regime for crypto-collateralized lending to align with traditional pawnbroking along with equivalent consumer protections; © harmonize definitions and obligations across the PSA, SFA, FSMA, and Pawnbrokers Act; (d) enable regulatory sandboxes under a common regulating authority for hybrid models that blend traditional and digital asset services, within a brick and mortar set-up. Such a law would not only eliminate legal ambiguity but also signal regulatory maturity, attracting responsible innovation, entrepreneurship and reinforcing Singapore’s status as a progressive commercial hub.

Lessons from the US

The development in the US offers interesting insights and arguments in favour of a bespoke crypto-legislation for Singapore.

Before 2025, regulators in the United States adopted the so-called “regulation by litigation” approach by enforcing existing financial laws. This created uncertainty, with overlapping jurisdiction from the SEC, CFTC, FinCEN, and state regulators. The current Trump Administration has jettisoned regulation by litigation and has shifted toward tailored federal legislation, like the STABLE Act and the GENIUS Act. These initiatives, among other things, aim to create a unified licensing regime and clear rules for stablecoins and crypto activities, such as lending, borrowing, etc. While the US still grapples with fragmentation, its pivot toward bespoke crypto legislation signals recognition that digital assets require purpose-built legal frameworks, not retrofitted ones.

Conclusion

The current regulatory landscape in Singapore demonstrates potential signs of contradiction, where crypto is regulated under the PSA and SFA but excluded under the Pawnbrokers Act (2015), but a mere amendment to the Pawnbrokers Act (2015) to include digital assets may not be sufficient. As digital assets continue to blur the boundaries between finance, technology, and property law, any piecemeal regulation is no longer sufficient. A bespoke crypto law would provide the clarity, coherence, and confidence needed to support innovation while safeguarding the public interest. In the race to define the future of finance, Singapore must not only keep pace — it must lead.

PURPOSE-BUILT CRYPTO LAW: IMPERATIVE OR A MATTER OF CHOICE? was originally published in Pundi X on Medium, where people are continuing the conversation by highlighting and responding to this story.