3-7-2023 (SINGAPORE) Crypto service providers in Singapore will be required to deposit customer assets in a statutory trust by the end of this year, the Monetary Authority of Singapore (MAS) announced on Monday. This move aims to enhance customer protection and mitigate the risk of loss or misuse of assets.
The MAS introduced this requirement after conducting a public consultation on enhancing customer protection, which began in October 2022. By mandating the deposit of customer assets in a statutory trust, the MAS aims to ensure the safekeeping of these assets and facilitate their recovery in the event of a Digital Payment Token (DPT) service provider’s insolvency.
In addition to the asset deposit requirement, the MAS has also imposed restrictions on cryptocurrency service providers, prohibiting them from facilitating lending and staking of tokens for retail customers. However, institutional and accredited investors will still have access to these services.
To implement these new requirements, Singapore’s central bank has invited public feedback on legislative amendments. This engagement aims to ensure effective implementation and address any concerns or practical considerations related to the regulations.
Angela Ang, Senior Policy Advisor for blockchain intelligence firm TRM Labs and a former MAS regulator, commented on the developments in the Singapore market. She noted that the MAS’s decision to not enforce certain proposals, such as mandating an independent custodian for customer assets, demonstrates the regulator’s attentiveness to industry feedback and consideration of practical challenges, such as a limited number of third-party custodians.
Ang further highlighted that Singapore’s requirements are comparable to those imposed on other payment service providers and are less stringent than Hong Kong’s rules. For example, Singapore now requires 90% of customer crypto to be held in crypto wallets, whereas Hong Kong mandates 98%. Additionally, Singapore does not require cold wallets to be located onshore, unlike Hong Kong.
The MAS stated that its position on banning crypto entities from facilitating lending and staking activities for retail customers may evolve in the future. The regulator acknowledged differing views in the public consultation, with some suggesting allowing these activities with proper consent and risk disclosures, while others advocated for a complete ban. The MAS will closely monitor market developments, consumer risk awareness, and ensure that its measures remain balanced and appropriate.
Singapore’s regulatory approach reflects its commitment to support technological advancements in the industry while maintaining a strong stance against illicit activities within the crypto sector. The MAS aims to improve traditional financial systems through the adoption of innovative technologies. In line with this objective, the MAS recently proposed the design of open, interoperable networks for tokenized digital assets and standards for the use of digital money.
