24-11-2023 (SINGAPORE) The Monetary Authority of Singapore (MAS) is set to implement stringent measures aimed at regulating digital payment token (DPT), commonly known as cryptocurrency, service providers in Singapore. This move, announced on Thursday (Nov 23), follows a comprehensive review of feedback received on the proposed regulations, emphasizing business conduct and consumer access measures to mitigate potential harm.
In a bid to address concerns raised in October 2022 regarding the risks associated with cryptocurrency trading, MAS has outlined a multi-faceted approach encompassing three key areas: Consumer access, business conduct, and technology risks. The first set of consultation responses and proposed legislative amendments, released in July, primarily focused on the segregation and custody requirements for customers’ assets.
The finalized measures, scheduled for phased implementation starting mid-2024, include a prohibition on accepting payments via locally issued credit cards or charge cards by service providers. MAS highlighted that while credit cards offer a convenient payment method, they also provide retail customers with easy access to debt financing, contradicting the regulator’s policy to curb cryptocurrency purchases on credit. Service providers are urged to dissuade retail customers from speculative cryptocurrency trading by refraining from offering any incentives.
MAS defines a retail customer as an individual who is not an accredited or institutional investor. Recognizing that retail customers often lack a comprehensive understanding of associated risks and may lack the financial resilience to withstand substantial losses, MAS emphasizes the need for service providers to assess a customer’s risk awareness before granting access to their services.
Under the new regulations, service providers are barred from providing financing, margin, or leverage transactions, and they must limit the value of cryptocurrencies when determining a customer’s net worth. All customers, with the exception of institutional investors, are to be treated as retail customers by default.
Accredited investors, individuals with at least S$2 million in net personal assets, are exempted from certain rules. However, MAS specifies that no more than 50% of the value of a person’s crypto holdings can be used, or up to S$200,000, whichever is lower.
MAS has also laid out business conduct rules, requiring crypto service providers to identify, mitigate, and transparently disclose potential and actual conflicts of interest. Providers must publish policies, procedures, and criteria governing the listing of a DPT. Additionally, effective policies and procedures for handling customer complaints and resolving disputes must be established.
In addressing technology and cyber risks, MAS mandates DPT service providers to maintain high availability and recoverability of their critical systems, aligning with existing requirements imposed on financial institutions.
Ms Ho Hern Shin, MAS’ Deputy Managing Director (Financial Supervision), emphasized the obligation of DPT service providers to safeguard consumer interests. Despite the introduced measures, she cautioned consumers to remain vigilant and exercise caution when dealing with DPT services, urging them to avoid unregulated entities, including those based overseas.
