The Monetary Authority of Singapore (MAS) announced today (July 3) new regulations for digital asset firms in response to a public consultation on proposed rules for the cryptocurrency sector.
The MAS revealed that licensed firms will be required to segregate customers’ assets from their own and hold them under a statutory trust.
The regulatory authority stated that there was significant support for digital payment token (DPT) service providers to ensure the security of customers’ funds. As per the proposed rules, these firms will need to conduct daily reconciliation of customers’ assets, maintain proper records, and implement access and operational controls for customers’ DPTs in Singapore.
To ensure operational independence, custodial functions must be separated from other business units within the licensed crypto companies. Custodianship refers to the specific role of holding customers’ assets for safekeeping.
In addition to these requirements, licensed crypto companies will be obligated to provide clear disclosures to customers regarding the risks associated with having their assets held by the service provider. The MAS aims to enhance transparency and protect the interests of retail investors.
To safeguard retail customers, the MAS intends to restrict DPT service providers from facilitating lending or staking of their tokens. These activities, while suitable for institutional and accredited investors, present greater risks for retail participants. Staking involves lending digital tokens to other companies in the sector to earn substantial interest.
The regulator emphasised that these new measures are a result of public feedback gathered during the consultation process in October 2022. The MAS sought to establish robust safeguards to protect retail investors and ensure the growth and stability of the cryptocurrency sector.
To finalise the implementation of these requirements, the MAS is currently seeking public feedback on the draft legislative amendments to the Payment Services Regulations. This demonstrates the authority’s commitment to transparency and collaboration with stakeholders to create an effective regulatory framework.
The MAS’s proactive approach to regulating the digital asset industry underscores Singapore’s commitment to becoming a global hub for cryptocurrency innovation while maintaining investor protection and financial stability.