With the newest regulations, MAS aims to protect investors from major disasters in the crypto industry.
To enhance investor safeguards and integrity within the cryptocurrency sector, the Monetary Authority of Singapore (MAS) has mandated digital payment token (DPT) service providers to lodge customer assets into statutory trusts by the end of the year.
Announced on July 3rd, the new regulation aims to minimize the potential for loss or misuse of customer assets while ensuring a smoother recovery process should a DPT service provider become insolvent.
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This action forms part of the MAS's broader effort to mitigate consumer risks within the cryptocurrency industry, which was kick-started with a public consultation launched in October 2022.
The MAS reported "significant interest" from a diverse range of respondents toward this initiative.
In the official feedback to the public consultation, the MAS acknowledged that the majority of respondents supported the notion of DPT service providers depositing user assets into a trust account shared with the user assets.
However, a few respondents disagreed, suggesting that DPTSPs should be required to segregate each customer’s assets from other customers’ assets in separate blockchain addresses.
This approach, the respondents argued, would offer users enhanced transparency by allowing them to verify and identify their holdings.
In addition to the custodial rules, the MAS introduced daily reconciliation requirements for customer assets and obligatory record-keeping measures. Crypto companies are now required to maintain access and operational controls over customers' DPTs within Singapore.
The MAS noted that some respondents suggested permitting crypto firms to offer lending and staking services under the conditions of retail customer consent and proper risk disclosures.
Meanwhile, others called for an outright ban on these speculative, high-risk activities. In the MAS's words:
MAS will monitor market developments and consumer risk awareness as these evolve, and will take steps to ensure that our measures remain balanced and appropriate.
Singapore's recent regulatory enhancements aim to prevent catastrophic industry failures like the FTX case, which resulted in substantial customer losses. The updated regulations underscore Singapore's commitment to securing a safer and more reliable environment for cryptocurrency investors.
