The Monetary Authority of Singapore (MAS) has declared that cryptocurrency service providers in Singapore would need to place client funds under a statutory trust before the end of the year for security.
Following a public consultation on improving customer protection that was launched in October 2022, the MAS is now required to comply. The MAS stated that this will “minimize the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT (Digital Payment Token or Cryptocurrency) service provider’s insolvency.”
The MAS has also prohibited cryptocurrency service providers from enabling the lending and staking of tokens to retail users, however institutional and accredited investors can still make use of these services. Singapore’s central bank has also requested public input on legislation changes aimed at implementing the most recent regulations.
According to Angela Ang, Senior Policy Advisor for blockchain intelligence company TRM Labs and former MAS regulator, “this latest tightening of retail access to crypto should be no surprise to anyone following the Singapore market.” “MAS’ decision to wait before acting on some proposals, such as requiring an independent custodian for customer assets, demonstrates that it is paying attention to the industry and is considerate of real-world factors like a lack of third-party custodians.”
Singapore’s criteria are the same as those of other payment service providers, according to Ang, who also informed CoinDesk via email that they are less stringent than those in Hong Kong. Currently, Singapore requires 90% of customer cryptocurrency to be housed in cryptocurrency wallets, compared to Hong Kong’s requirement of 98%, and cold wallets are not required to be onshore, as they are in Hong Kong. According to the MAS, its stance on forbidding cryptocurrency entities from facilitating the lending and staking of tokens for retail clients may change in the future.
“Some respondents suggested allowing DPT service providers to offer these activities with the retail customer’s consent and risk disclosures, while others advocated a ban on these high-risk and speculative activities,” the MAS added. “MAS will take steps to ensure that our measures remain balanced and appropriate while taking into account changing market developments and consumer risk awareness.”
The goal of Singapore is to be “brutal and unrelentingly hard” on bad behavior in the cryptocurrency business, and it is committed to encouraging technology in the industry that will help enhance current traditional financial institutions. The MAS also offered rules for the usage of digital money last month along with suggestions for how to create open, interoperable networks for tokenized digital assets.
The most recent investor protection-related regulatory reforms in Singapore aim to address industry implosions like FTX, which resulted in clients losing millions of dollars. Furthermore, the crypto loan crisis in 2022 had a severe influence on Singapore enterprises, with large local firms such as Three Arrows Capital and Hodlnaut going bankrupt during the bear market.