Singapore to require crypto firms to put user assets into trusts by year-end

MAS Implements New Regulations to Enhance Investor Safeguard

Singapore’s central bank is implementing new regulations to enhance investor safeguard and uphold the honesty of the cryptocurrency sector.

The Monetary Authority of Singapore (MAS) declared on July 3 that crypto service providers must have customer assets placed into a statutory trust by the end of the year.

The regulator stated that this would lessen the danger of customers’ assets being lost or misused, and would make it easier to get customers’ assets back in the case of a DPT service provider going bankrupt.

Following a public consultation on regulatory measures to reduce risks to consumers from crypto trading which was initiated in October 2022, new custody measures have been implemented. The Monetary Authority of Singapore (MAS) reported that the consultation received “significant interest” from a wide variety of respondents.

In their response to the public consultation, Singapore’s central bank indicated that the majority of respondents were in favour of permitting digital payment token service providers (DPTSPs) to deposit their customers’ assets into the same trust account as the assets of other users.

The MAS noted that some respondents disagreed, proposing that DPTSPs should be obligated to divide each customer’s assets from other customers’ assets in distinct blockchain addresses. These respondents argued that individual custody segregation could offer customers more transparency, allowing them to recognize and authenticate their own holdings.

In addition to custody requirements, the Monetary Authority of Singapore (MAS) also mandated that crypto companies do daily reconciliations of customer assets, as well as properly maintain records. Digital Payment Token Service Providers (DPTSPs) must also have access and operational controls in place for customers’ Digital Payment Tokens (DPTs) in Singapore, and ensure that the custody function is independent from other business units.

Proposal to Prohibit Crypto Companies from Offering Lending or Staking Services

The regulator is also in the process of crafting a proposal that would prevent crypto service providers from offering lending or staking services to their retail customers with digital assets.

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The MAS reported that some respondents proposed permitting crypto companies to provide lending and staking services, provided that retail customers provide their consent and are made aware of the risks. It was also suggested that these high-risk and speculative activities should be prohibited, the regulator noted.

Regulatory developments in Singapore that are related to investor protection are being implemented to prevent industry implosions such as FTX, which caused customers to lose millions of dollars. Furthermore, the crypto lending crisis in 2022 had a great effect on Singaporean firms, leading to the bankruptcy of major local corporations like Three Arrows Capital and Hodlnaut during the bear market.

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