Singapore’s Monetary Authority (MAS) has announced new measures aimed at improving investor protection and market integrity within the cryptocurrency industry. By year-end, crypto service providers will be required to hold customer assets in a statutory trust, reducing the risk of loss or misuse of these assets and facilitating their recovery in case of insolvency.
The MAS decision follows a public consultation launched in October 2022, which received significant interest from various stakeholders. In response to the consultation, the majority agreed that digital payment token service providers (DPTSPs) should be permitted to deposit user assets in the same trust account as other users. However, some respondents suggested segregating each customer’s assets in separate blockchain addresses, enabling greater transparency for customers to verify their holdings.
In addition to custody requirements, crypto companies operating in Singapore will need to perform daily reconciliation of customer assets and maintain proper books and records. They must also ensure operational independence of the custody function from other business units and maintain access and controls over customers’ digital payment tokens (DPTs).
Alongside custody measures, the MAS is working on proposals to restrict crypto service providers from offering lending or staking services to retail customers. These restrictions would not apply to institutional and accredited investors, allowing them to continue participating in such activities.
Respondents to the consultation had varying opinions on lending and staking services. Some suggested that these activities should be allowed with the condition of explicit consent and risk disclosures from retail customers, while others advocated for a complete ban due to their perceived high risk and speculative nature. The MAS emphasized its commitment to monitoring market developments and consumer risk awareness, ensuring that regulatory measures remain balanced and appropriate.
These regulatory developments in Singapore aim to prevent incidents like the FTX implosion, which resulted in substantial losses for customers, as well as address the crypto lending crisis of 2022 that affected local firms during the bear market. By implementing robust custody requirements and considering restrictions on certain activities, Singapore seeks to enhance investor protection and maintain market integrity in the cryptocurrency industry.