- The new regulations introduced by the MAS require crypto exchanges and DPT service providers to safekeep customer assets under a statutory trust.
- The regulations emphasize the need for DPT service providers to segregate customer assets from their own assets. This practice, along with daily reconciliation of customer assets and proper record-keeping, helps safeguard customer funds and promotes transparency in the management of DPT services.
- MAS will impose restrictions on crypto exchanges and DPT service providers to prevent them from facilitating lending and staking activities for retail customers.
- The regulatory framework seeks to foster innovation in the crypto industry while effectively protecting investors.
The Monetary Authority of Singapore (MAS) today announced a series of stringent regulations aimed at bolstering investor protection and market integrity in the rapidly growing crypto industry. These measures will have significant implications for consumers and the overall crypto industry in Singapore.
MAS has taken a proactive approach to address the potential risks associated with crypto services by requiring crypto exchanges to safeguard customer assets under a statutory trust. By doing so, MAS aims to mitigate the risk of asset loss or misuse and provide a clear pathway for the recovery of customer assets in the event of a service provider’s insolvency. This development is crucial as it instills confidence in consumers and ensures their assets are adequately protected.
Manan Vora, SVP of Strategy and Business Operations at Liminal, a wallet infrastructure and custody solutions platform, commends MAS for recognizing the importance of protecting user assets and believes that these steps will have a positive impact on the adoption of digital assets.
According to Vora, MAS’s regulatory actions are a “masterstroke” that will bring numerous benefits to the crypto industry. By significantly reducing risks, preventing the misuse of user funds, and ensuring full recovery of assets in unfortunate events such as insolvency, MAS’s measures are expected to foster trust and confidence among investors and users.
The move follows a comprehensive public consultation held in October 2022, which garnered substantial interest from a wide range of stakeholders.
The consultation received overwhelming support for measures that enhance investor protection, including the segregation of customer assets from the service provider’s own assets, daily reconciliation of customer assets, and the establishment of robust operational controls. These practices will help safeguard customer funds and ensure transparency in the management of DPT services.
MAS is now inviting public feedback on the proposed legislative amendments to the Payment Services Regulations. By actively seeking input from industry participants and consumers, MAS aims to strike a balance between effective regulation and fostering innovation in the crypto industry.
The forthcoming publication of guidelines will provide further clarity on the implementation of these regulations, ensuring consistent adherence across the sector.
Vora expressed that the industry players were not surprised by the strong policy implemented by MAS based on the outcomes of the public consultation.
He believes that MAS has taken into account the industry’s aspirations and has demonstrated a commitment to the highest standard of consumer protection, setting a benchmark for other markets and geographies.
While appreciating MAS’s efforts to safeguard customer funds through the proposed trust structure, Vora raises a point regarding the independent nature of digital assets. He recommends considering storing digital assets with independent, regulated, and compliant custodians.
This recommendation highlights the importance of having specialized custodial services that are specifically designed to provide secure storage solutions for digital assets.
In addition to the requirement for safeguarding customer assets, MAS will restrict crypto exchanges from facilitating lending and staking activities for retail customers. These activities are regarded as high-risk and speculative and are deemed generally unsuitable for retail investors. However, institutional and accredited investors will still have access to these services, recognizing their ability to navigate such risks.
During the public consultation, MAS received diverse views on this proposal. Some respondents advocated for providing lending and staking services to retail customers with their explicit consent and adequate risk disclosures. Others recommended a complete ban on these activities due to their inherent risks.
MAS said that it will closely monitor market developments and consumer risk awareness to ensure that its measures remain balanced and appropriate as the industry evolves.
MAS emphasizes the importance of consumer awareness and caution when engaging in crypto trading. The regulatory measures implemented by MAS, although designed to enhance investor protection, cannot guarantee the prevention of all losses. crypto trading is characterized by its highly speculative and volatile nature, making it inherently risky.
MAS points out that the requirement for crypto exchanges to safeguard customer assets under a statutory trust helps minimize the risk of asset loss, it is crucial for consumers to understand that there may still be significant delays in recovering their assets in the event of service provider insolvency. Such delays can occur due to the complexities involved in the liquidation process and the need to prioritize creditor claims.
Furthermore, MAS underscores the importance of consumers avoiding unregulated entities, particularly those based overseas. Dealing with unregulated entities exposes consumers to heightened risks, including the potential loss of all their assets. By promoting awareness and vigilance among consumers, MAS aims to safeguard their interests and prevent fraudulent activities within the crypto industry.
Manan Vora highlights the significance of the MAS latest move in strengthening Singapore’s position as a leading supporter of emerging technologies, particularly in the realm of crypto and blockchain. Vora believes that MAS’s decisive policy framework for digital assets will create an attractive environment for global entrepreneurs seeking to leverage Singapore’s favorable ecosystem for crypto-related services.
By implementing robust regulatory measures, MAS is fostering a compliant, regulated, and transparent crypto ecosystem in Southeast Asia. This development is welcomed by industry players like Vora, as it brings Singapore one step closer to establishing a solid foundation for the growth and maturation of the crypto industry within the region.
The introduction of these stringent regulations by MAS signifies Singapore’s commitment to fostering a safe and sustainable environment for crypto-related activities. By striking the right balance between consumer protection and market innovation, Singapore aims to position itself as a global leader in the crypto industry, attracting responsible players while ensuring investor confidence and trust.
Update/ Correction: 1. The comments in the article were earlier attributed to Mahin Gupta instead of Manan Vora, SVP of Strategy and Business Operations at Liminal. (July 4, 4:40 am ET)