An Indian-founded crypto exchange proposes a staffed Asian operation for spot trading and hosted custody, while retaining engineering in India. Should it establish the regulated business in Singapore, Hong Kong, or neither for its first customer market? This composite assumes that senior management and a core compliance and operations team genuinely relocate. The comparison concerns the same spot exchange for non-security tokens, with custody of admitted assets. It excludes lending, leverage, staking, token issuance and a separate payments business. It describes no actual application, licence or regulator engagement.
Executive Summary
- Hong Kong: choose a Hong Kong operating hub if the first business is a funded, Hong Kong-resident retail exchange using admissible tokens. The SFC route accommodates that market, but requires substantive supervision and a separate custody subsidiary. This is a conditional commercial choice, not a prediction of approval. (SFC, Licensing Handbook for Virtual Asset Trading Platform Operators, July 2025, paras. 1.1.1, 3.2.3–3.2.7, 3.2.22 and n. 10.)
- Singapore: choose Singapore if genuine Singapore customer demand supports the same staffed product and its distribution plan meets MAS expectations. Retail access remains possible. An overseas-only customer book is a poor launch premise: MAS generally will not grant the relevant Financial Services and Markets Act licence. (MAS, PS-G02, paras. 2.1–2.3; MAS, statement on digital-token service providers, 6 June 2025, paras. 2–3.)
- Singapore and Hong Kong: neither home permission supplies access throughout Asia. Start with the selected hub’s residents and admit another country only after a separate market-access decision. Hong Kong expressly limits its authorisation to its jurisdiction. (SFC, FAQ “Conducting business outside Hong Kong”, Q1; MAS, digital-token service providers statement, para. 3.)
- India: engineering may remain in India only under a workable allocation of operational authority. Resident-investor funding requires its own examination; foreign licensing does not determine the Indian financial-services classification. (MAS, PS-G03, para. 3.4.9 and Annex 1, Illustration 3; RBI, Master Direction—Overseas Investment, updated 1 April 2026, para. 21(7)(d).)
- Decision: select neither for immediate launch while the first market, customer contract and lawful funding route remain undecided. Authorise an application programme only after those conditions and the required staffing, custody and financial resources are funded. Satisfying admission criteria does not compel either regulator to issue a licence. (MAS, PS-G01, p. 8, assessment of each application on its merits; SFC, Licensing Handbook, paras. 3.2.15–3.2.23.)
First customers and the regulated counterparty
The proposed first market for the Hong Kong route is Hong Kong-resident retail customers buying and selling admitted spot assets. For Singapore, the comparator is Singapore-resident customers receiving the same service, with retail protections where applicable. These are market-selection hypotheses, not claims about an existing customer pipeline. Neither proposal depends on customers elsewhere in Asia to justify its first launch.
Hong Kong is the preferred worked route only if management chooses that local retail market and can support its operating costs. Singapore remains a viable competing retail location. Its restrictions on public promotion and customer incentives can defeat a particular acquisition plan; they do not make every retail business impossible. A documented Singapore institutional or accredited-investor customer pipeline could reverse the commercial preference without changing the underlying spot-and-custody product. (MAS, PS-G02, paras. 2.1–2.3; PS-G03, paras. 4.2–4.4.)
The proposed hub operator should contract for the regulated exchange service and carry the corresponding responsibilities. In Hong Kong, its associated entity should hold customer assets under the prescribed trust arrangement. Placing the website or a group office in the hub while an Indian affiliate remains the undisclosed operator would require a different licensing analysis. The SFC distinguishes the licensed operator from its custody company; MAS requires an application to describe the actual business and assess its regulated services. (SFC, Licensing Handbook, para. 3.2.22 and n. 10; MAS, PS-G01, para. 4.1.1 and Appendix 3.)
Singapore permissions and overseas-only services
A Singapore crypto license is not a single permission covering every token business. For local-facing spot digital-payment-token services, the relevant route is a Standard Payment Institution (SPI) or Major Payment Institution (MPI) licence under the Payment Services Act 2019. MAS’s service classification includes dealing, exchange facilitation, transfers and custodial wallets. The expansion effective on 4 April 2024 brought additional custody and facilitation activities within scope, including certain services without possession of the assets. Keeping customer keys elsewhere does not itself remove the proposed operator from that perimeter. (MAS, Types of Payment Services, 10 October 2025, “Digital payment token service”; MAS, “MAS Expands Scope of Regulated Payment Services”, 2 April 2024, paras. 2–3.)
The licence category depends on the prescribed volume calculations across the services offered. MAS identifies monthly thresholds of S$3 million for one relevant payment service and S$6 million for two or more. Separate e-money limits apply if that product is added. Management should budget for the category its projected business requires, rather than assume a small initial customer count permits a permanently smaller licence. (MAS, Licensing for Payment Service Providers, “Types of Licences”, referring to Payment Services Act 2019, s. 6(5).)
An overseas-only operation faces the Digital Token Service Provider (DTSP) licensing regime under Part 9 of the Financial Services and Markets Act 2022. MAS confirmed that the regime took effect on 30 June 2025, without a transitional operating period. It generally will not issue licences to providers serving only overseas customers. The statement is an explanation of the regime and MAS’s licensing policy, not the legislation that created it. MAS also expressly preserved overseas business by providers already licensed for relevant services to Singapore customers. (MAS, digital-token service providers statement, 6 June 2025, paras. 2–5.)
MAS’s DTSP guidance covers relevant Singapore-incorporated entities and specified individuals or partnerships operating from Singapore. Its exceptionally narrow admission criteria include a defensible reason for having no Singapore business, existing adequate supervision and an acceptable structure. A corporate applicant also needs a resident executive director, Singapore compliance leadership and at least S$250,000 base capital. An office lease and relocated employees do not overcome the adverse overseas-only admission policy. (MAS, Guidelines on Licensing for Digital Token Service Providers, 30 May 2025, paras. 1.1, 3.1, 3.2.5 and Appendices 1–2.)
The local-facing route therefore requires a genuine Singapore business proposition. It is not a safe planning assumption that a token local customer, or another group company’s licence, exempts an otherwise overseas-only operator. The actual applicant, activities and statutory exemption must correspond. The recommended Singapore route is a substantive local exchange seeking the relevant Payment Services Act permission, with overseas expansion considered separately. (MAS, Guidelines on Licensing for Digital Token Service Providers, paras. 2.1–2.3; MAS, digital-token service providers statement, para. 3.)
Singapore customers, custody and operating controls
The local-facing applicant may be Singapore-incorporated or a Singapore branch of a foreign company. It needs an executive director who is a Singapore citizen or permanent resident. Alternatively, an executive director holding an Employment Pass must serve alongside another director who is a citizen or permanent resident. MAS expects resident, operational executive directors and an in-house Singapore compliance officer for DPT services. It also assesses directors, controllers and the applicant for fitness and propriety. The relocated team must satisfy those requirements in substance. (MAS, Licensing for Payment Service Providers, “Eligibility Criteria” and “Assessment Criteria”; PS-G01, Appendix 1, Table A1-2 and n. 9, and Appendix 2.)
MAS allows regulated providers to serve retail customers while imposing restrictive conduct expectations. These include risk-awareness assessment, restrictions on incentives, credit and leverage, and restrictions on accepting Singapore-issued credit or charge cards. The retail safeguards reach the provider’s overseas retail customers too. MAS also restricts lending or staking retail customer assets. These measures are relevant to the proposed custody product even though the recommended launch excludes yield services. (MAS, PS-G03, paras. 3.7, 4.1–4.4.)
MAS’s public-promotion guidance discourages promotion to the general public in Singapore in public areas and through third-party websites, media and influencers. Providers may communicate through their own corporate websites, applications and official social-media accounts within the stated standards. A retail plan dependent on unrestricted third-party acquisition would need redesign before Singapore becomes the preferred hub. (MAS, PS-G02, paras. 2.1–2.3.)
Customer-asset arrangements require segregation and safeguarding through trust accounts. MAS permits the provider to maintain the account itself or engage a safeguarding person. MAS’s guidance expects the instruments controlling at least 90% of customer assets deposited in trust accounts to remain in cold storage. Singapore-resident senior personnel must exercise the required operational control. MAS’s multi-party computation illustration does not require those personnel to move assets unilaterally; their authorisation must be indispensable to the relevant movement. Indian engineers should not hold a bypass that makes this local control ineffective. (MAS, PS-G03, paras. 3.2, 3.4.4, 3.4.8–3.4.9 and Annex 1, Illustration 3.)
The operating budget must support customer and beneficial-owner checks, risk assessment, transaction monitoring, suspicious-transaction reporting and transfer information. MAS Notice PSN02 contains binding AML/CFT requirements for the Payment Services Act route. Notices FSM-N13 and FSM-N14 impose technology-risk and cyber-hygiene requirements on the institutions within their respective scopes. The group needs tested incident escalation, access controls and recovery arrangements across its Singapore and Indian teams. (MAS, Notice PSN02, amended 30 June 2025, paras. 4–6, 13–14 and 16–17; Notices FSM-N13, paras. 4–8, and FSM-N14, para. 4.)
An exceptional overseas-only DTSP would instead have its own AML notice, FSM-N27, including value-transfer requirements, and technology notice FSM-N30. Its admission guidance also identifies cyber-hygiene and conduct notices. The board cannot treat that regime as an unregulated custody alternative merely because customers reside abroad. (MAS, Notice FSM-N27, amended 30 June 2025, paras. 6, 14–15; Notice FSM-N30, paras. 3–7; DTSP Licensing Guidelines, paras. 5.2–5.7.)
A new application requires a legal opinion and an independent assessment of AML/CFT and consumer-protection controls. The submitted assessment must have been signed within the preceding three months. MAS also requires a technology and cybersecurity assessment after in-principle approval. The board must fund systems preparation and independent scrutiny at the relevant stages, without treating in-principle approval as permission to launch. (MAS, PS-G01, paras. 4.1.1, 4.1.5–4.1.6 and 4.1.14.)
Hong Kong permissions and the first retail market
For this product, Hong Kong crypto exchange license means the SFC’s virtual-asset trading-platform authorisation under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The SFC identifies carrying on the exchange business in Hong Kong and actively marketing relevant services to the Hong Kong public as licensing triggers. Security tokens introduce the Securities and Futures Ordinance perimeter, including Type 1 (dealing in securities) and Type 7 (providing automated trading services). The initial hypothesis therefore excludes security tokens rather than assuming an AMLO licence covers them. (SFC, Licensing Handbook, para. 1.1.1; FAQ “Actively markets”, Q1; Circular 25EC57, n. 1, identifying AMLO, s. 53ZRK, and SFO, s. 116.)
The SFC permits an eligible Hong Kong-incorporated company or registered overseas company to apply. The recommended structure uses a Hong Kong company because its management, customer contracts and regulated operation would be there. Its custody associated entity must be a wholly owned, Hong Kong-incorporated subsidiary holding a trust or company service provider licence. A nominal director or mailbox cannot perform the proposed operating functions. (SFC, Licensing Handbook, paras. 3.2.1, 3.2.22 and n. 10.)
Retail access requires token admission and customer controls. Ordinary retail tokens must meet due-diligence and liquidity standards; the baseline includes two acceptable indices from independent providers, with additional qualifications for at least one provider. The SFC can consider a token-specific exception to the index requirement. The platform must also assess customer knowledge and risk exposure, and apply suitability where required. A licence does not approve every proposed token or sales method. (SFC, Guidelines for Virtual Asset Trading Platform Operators, paras. 7.6–7.8, 9.4, 9.7 and 9.17–9.23.)
Later SFC requirements qualify the original 2023 text. From 3 November 2025, the 12-month token track-record requirement no longer applies to assets offered only to professional investors. That change did not remove the requirement generally for ordinary retail tokens. Qualifying HKMA-regulated stablecoins receive separate treatment. The professional-only exception cannot support a launch whose economics depend on selling newly issued ordinary tokens to retail customers. (SFC, Circular 25EC57, 3 November 2025, paras. 4–6 and Appendix I.)
Hong Kong custody, management and authorisation burden
Hong Kong’s custody model requires segregated customer assets through the associated entity. The baseline is 98% cold storage, subject to SFC-permitted exceptions. Seeds and private keys must be securely stored in Hong Kong. The approved compensation arrangement ordinarily covers 50% of cold-storage assets and 100% of assets in hot and other storage. These requirements affect treasury, custody technology and the funding plan even when the group already has an Indian wallet system. (SFC, VATP Guidelines, paras. 10.1, 10.5–10.8 and 10.22.)
Custody of assets not traded on the platform requires an application to modify the relevant conditions. It is not an automatic extension of this exchange’s custody permission. (SFC, Circular 25EC57, para. 10.)
The SFC’s August 2025 custody circular addresses accountable senior personnel, transaction approval and protected wallet infrastructure. Applied to this group, the Hong Kong team should control custody policy and withdrawal approvals; Indian developers should work through tested, restricted deployment processes. A vendor contract would not cure a design in which developers can alter destination addresses or bypass approval controls. (SFC, Circular 25EC44, 15 August 2025, sections I–III.)
The operator needs at least two responsible officers, including one ordinarily resident in Hong Kong and one executive director. Every executive director must seek approval as a responsible officer. The SFC assesses competence, authority and fitness, including relevant owners and managers. The proposal must therefore identify people capable of supervising the exchange, rather than assume relocated founders automatically qualify. AML staffing must support the SFC’s customer, transaction-monitoring and travel-rule requirements. (SFC, Licensing Handbook, paras. 3.2.3–3.2.15 and 4.1–4.3; SFC, AML/CFT Guideline, 1 June 2023, chapters 4–7 and 12.)
For new applicants, the SFC’s January 2025 process requires an external assessment of deployed systems and controls, performed as a direct assurance engagement and signed off by an eligible practising CPA. It uses a tripartite arrangement with the applicant and SFC. The old first-phase/second-phase assessment description should not be used to budget this new application. Engineering must reach assessable readiness before licensing can be treated as a near-term launch dependency. (SFC, Circular 25EC2, 16 January 2025, paras. 3–9, 14–15 and n. 1.)
SFC guidelines are supervisory instruments, rather than statutes whose every breach independently creates an offence. Their application through licensing requirements, conditions and fitness assessments makes them material to admission and continued operation. The group should not discount them merely because they are called guidelines. (SFC, VATP Guidelines, paras. 1.6–1.8.)
Stablecoins, fiat and activities outside the initial product
Hong Kong’s Stablecoins Ordinance has applied since 1 August 2025. Issuing specified stablecoins and offering them involve different permissions. A licensed VATP is a permitted offeror, but its platform licence does not authorise it to issue a stablecoin. Retail offers are restricted to the regulated class; unregulated specified stablecoins may be offered only to professional investors by permitted offerors. (HKMA, Explanatory Note on Licensing of Stablecoin Issuers, July 2025, paras. 2.3–2.10; Secretary for Financial Services and the Treasury, written answer to LCQ10, 10 September 2025, reply (1).)
The SFC’s 27 May 2026 circular applies to specified stablecoins issued by an HKMA licensee where the issuance is authorised by its licence. For that defined class, the SFC removes the liquidity and index requirements and substitutes advance written notification for specified retail token-admission approvals. It also removes the 12-month track-record requirement for that class and the knowledge assessment for clients served only in those stablecoins. Those holdings need not be included in client exposure-limit calculations. Other applicable admission and conduct duties continue. The board must verify the issuer and authorised issuance, rather than equate a familiar stablecoin brand with retail eligibility. (SFC, Circular 26EC26, paras. 2, 4–8 and 12, and Appendix 1.)
Fiat deposits for exchange settlement require a documented banking and safeguarding arrangement. A separate remittance or stored-value product needs its own perimeter analysis. Hong Kong Customs identifies a distinct money-service licensing regime for money changing and remittance, including applicable exemptions. Singapore separately classifies account issuance, money transfer and e-money services under its payments regime. Using a banking partner does not answer which activities the exchange itself performs. (Hong Kong Customs and Excise Department, Money Service Operators Licensing Guide, May 2026, sections II–III; HKMA, Regulatory Regime for Stored Value Facilities, “Licensing of Stored Value Facilities (SVFs)”; MAS, Types of Payment Services.)
Singapore’s September 2026 consultation on Payment Services Act amendments for stablecoins is a legislative proposal, not an operative issuer permission. The recommended product does not depend on that proposal. Nor should the same-company spot model silently expand into broking: MAS’s consumer guidance expects separation when a market operator also acts as broker or agent on its own market. That extension would change the entity and management requirements being compared. (MAS, Consultation P015-2026, 1 September 2026; PS-G03, para. 5.4.4.)
Customer access outside the hub
Home authorisation and foreign customer access require separate decisions. The SFC states that its authorisation covers Hong Kong and directs operators to satisfy the rules of other jurisdictions. MAS’s acceptance of overseas business by local-facing licensees resolves the Singapore side of that question only. Neither statement supplies permission from a customer’s country. (SFC, FAQ “Conducting business outside Hong Kong”, Q1; MAS, digital-token service providers statement, para. 3.)
India demonstrates the distinction. FIU-IND requires registration for covered virtual-digital-asset service providers and has applied the obligation to offshore providers serving India. Registration involves substantive examination; generating a portal identification number is not approval. A Singapore or Hong Kong licence therefore cannot substitute for the Indian AML entry requirement. FIU registration also should not be described as a general exchange licence or clearance of every Indian legal issue. (FIU-IND, Third Revision of Registration Circular, 15 September 2025, sections II–VII; Ministry of Finance, offshore VDA-provider notice announcement, 1 October 2025.)
The initial country allowlist should accordingly contain only the chosen first market. Expansion requires a recorded country decision covering solicitation, customer eligibility, local permission, token treatment and money flows. Residency checks and access controls should support that decision. An India-first or unspecified Asia-first business should choose neither hub as a substitute for establishing its first-market legal access.
India ownership, remittances and actual control
Indian-founded describes the business’s origin, not the residence or legal capacity of each investor. The funding inquiry concerns the actual investor and transaction. RBI’s current Overseas Investment Direction distinguishes Indian entities from resident individuals. It classifies foreign financial-services activity by asking whether the equivalent activity in India requires registration with, or regulation by, an Indian financial-sector regulator. The possession of a MAS or SFC licence does not answer that Indian-law classification exercise. (RBI, Master Direction—Overseas Investment, updated 1 April 2026, paras. 21(7)(d) and 22.)
For an Indian entity outside financial services investing in a foreign financial-services business other than banking or insurance, RBI specifies three preceding financial years of net profits, subject to the stated conditions. It prohibits resident individuals from making financial commitments by way of debt. A resident individual who made overseas direct investment without control cannot acquire control if the foreign entity subsequently acquires or establishes a subsidiary. Hong Kong’s mandatory custody subsidiary must therefore appear in the ownership and remittance assessment before funding is committed. An Indian founder’s personal remittance allowance should not be assumed to finance the proposed controlled group. (RBI, Master Direction—Overseas Investment, paras. 21(3), 21(7)(b), 22(1) and 22(3).)
The designated authorised-dealer bank must receive the required transaction and reporting documents. RBI requires the relevant investment identifier before the first applicable remittance or acquisition; that identifier is not substantive approval. Loans and guarantees have separate conditions. The budget must therefore identify the permitted source and instrument for initial capital and later loss funding. (Foreign Exchange Management (Overseas Investment) Regulations, 2022, regs. 3–5 and 9–10; RBI, Master Direction—Overseas Investment, paras. 16 and 26–27.)
Engineering location and company control must be examined separately. Under section 6(10) of the Income-tax Act, 2025, an overseas company can be Indian-resident if its place of effective management is in India. The test concerns where the company’s key management and commercial decisions necessary for the conduct of its business as a whole are made in substance. Retaining developers in India does not itself establish that test; retaining decisive founder control there can create the problem despite an overseas boardroom. (Income-tax Act, 2025, s. 6(10).)
For the proposed hub, management should approve token admission, risk limits, customer acceptance, custody policy and material system changes there. The Indian engineering agreement should preserve audit access, incident cooperation, controlled production access and an executable exit arrangement. These are operational design conditions for the recommendation. They require people with authority and a tested technical allocation, rather than contractual statements contradicted by system permissions. (MAS, PS-G01, paras. 3.1.3 and 3.1.7–3.1.9; SFC, Circular 25EC44, sections I–III.)
Funding commitments and facts that reverse the choice
Singapore’s published minimum base capital is S$100,000 for an SPI and S$250,000 for an MPI. An MPI must also provide security of S$100,000 or S$200,000 under the applicable volume test. MAS describes six to twelve months of operating expenses as a capital-buffer rule of thumb. That buffer is supervisory guidance, rather than a universal fixed cash minimum. Local compliance, legal analysis, independent assessment and recurring audit costs must be funded beyond the licence fee. (MAS, PS-G01, paras. 3.1.5–3.1.10 and 4.1.1–4.1.6.)
Hong Kong requires HK$5 million paid-up capital and required liquid capital of at least HK$3 million, or the higher applicable financial-resources calculation. The SFC also expects the operator’s own liquid assets in Hong Kong to cover at least twelve months of operating expenses; virtual assets do not count for that requirement. Custody compensation, the associated entity and external assessment add distinct commitments. These requirements should not be mechanically added together: the same resources may satisfy more than one test only where the relevant calculation permits. (SFC, Licensing Handbook, paras. 3.2.17–3.2.23; VATP Guidelines, para. 10.22.)
Before choosing Hong Kong, the board should approve a Hong Kong-first revenue case, a permissible token list and the customer-contract allocation. It should fund qualified resident supervision, compliant custody, assessable systems and the required financial resources through a documented lawful investment route. The recommendation fails if any of those conditions fails. It is not founded on a quoted approval timetable or an assumed total setup price.
Singapore becomes preferable when genuine Singapore customer demand, compliant distribution and the required local decision-makers support its operating costs. Hong Kong loses its preference if the intended retail tokens or ownership route cannot fit its requirements. Neither jurisdiction should host the initial regulated exchange if customers remain geographically undefined, control will remain in India, lawful loss funding is unavailable, or the first market requires a different local permission. The next expenditure should resolve those decisions before committing the group to an exchange application.