The Monetary Authority of Singapore (MAS) has announced new measures aimed at improving investor protection and market integrity in the cryptocurrency industry. The new requirements, to be implemented by the end of the year, mandate that crypto service providers hold customer assets in a statutory trust. This measure is intended to mitigate the risk of asset loss or misuse and facilitate asset recovery in the event of a provider’s insolvency.
The MAS conducted a public consultation on regulatory measures to reduce risks in crypto trading, which garnered significant interest from various stakeholders. In response to the consultation, the majority of respondents agreed that digital payment token service providers (DPTSPs) should be allowed to deposit user assets in the same trust account as other users’ assets. However, a few respondents disagreed, suggesting that each customer’s assets should be segregated in separate blockchain addresses to enhance transparency.
Alongside custody requirements, crypto companies are also required to perform daily reconciliation of customer assets, maintain proper books and records, and ensure that the custody function is operationally independent from other business units. The MAS is also considering a proposal to restrict crypto service providers from facilitating lending or staking of retail customers’ digital payment tokens (DPTs). However, for institutional and accredited investors, such activities may continue with appropriate risk disclosures.
The MAS acknowledges that market developments and consumer risk awareness will be monitored, and measures will be adjusted accordingly to maintain a balanced and appropriate regulatory environment.
These regulatory developments in Singapore are aimed at addressing incidents like the FTX implosion, which resulted in customer losses, as well as the crypto lending crisis that affected local firms during the bear market, leading to bankruptcies.
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