Crypto service providers in Singapore would need to deposit customer assets under a statutory trust before the end of the year for safekeeping, the Monetary Authority of Singapore (MAS) announced on Monday.
The requirement comes after the MAS received public consultation around enhancing customer protection initiated in October 2022.
"This will mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT (Digital Payment Token or Cryptocurrency) service provider’s insolvency," the MAS said.
The MAS has also restricted cryptocurrency service providers from facilitating lending and staking tokens to retail customers, but institutional and accredited investors could continue to take advantage of these services.
Singapore's central bank has also asked for public feedback on legislative amendments focused on the implementation of the latest requirements.
“This latest tightening of retail access to crypto should be no surprise to anyone following the Singapore market,” said Angela Ang, Senior Policy Advisor for blockchain intelligence firm TRM Labs and former MAS regulator. “MAS’ decision to hold back on certain proposals, such as requiring an independent custodian for customer assets, shows it’s listening to the industry and is sensitive to practical considerations such as a dearth of third-party custodians.”
Ang also told CoinDesk via email that Singapore's requirements are identical to other payment service providers and are not as strict as Hong Kong's rules. Singapore now requires 90% of customer crypto to be held in crypto wallets, unlike Hong Kong's requirement of 98%, and cold wallets are not required to be onshore, unlike in Hong Kong.
The MAS indicated that its position on banning crypto entities from facilitating lending and staking of tokens for retail customers could change in the future.
“Some respondents suggested to allow DPT service providers to offer these activities with the retail customer’s consent and risk disclosures, while others advocated a ban on these high-risk and speculative activities,” the MAS said. “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 commitment towards supporting technologies of the industry to improve existing traditional financial systems goes hand in hand with its stated objective of being "brutal and unrelentingly hard" on bad behaviour in the crypto industry. Last month, the MAS also proposed ways to design open, interoperable networks for tokenized digital assets and standards for the use of digital money.
UPDATE (July 3, 2023, 09:00 UTC): Adds details and context throughout and comment from Angela Ang.
UPDATE (July 3, 2023, 09:27 UTC): Adds second paraphrased comment from Angela Ang.
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