Singapore is set to introduce new requirements for cryptocurrency firms, signaling a tightening of regulations in the city-state. The Monetary Authority of Singapore (MAS) has announced draft legislative amendments that will compel crypto firms to keep customer funds in a statutory trust. The aim is to mitigate the risk of loss or misuse of customer assets and enable asset recovery in case of insolvency.
Under the proposed regulations, digital payment token (DPT) service providers will also be obligated to perform daily reconciliation, maintain proper records, and operate custody services independently. In addition, they will need to provide clear risk disclosures to customers regarding the storage of their assets. These measures follow a public consultation on the crypto sector held in October.
Singapore is also pushing ahead to restrict crypto firms from offering lending and staking services to retail customers. While self-staking will still be allowed, crypto platforms will be restricted from facilitating staking arrangements and lending of retail customers’ assets.
The new requirements, currently in the draft stage, are open for public comments before being passed into law. They will be incorporated into the Payment Services Regulations 2019 through guidelines and changes. Public feedback on the proposed regulations is being accepted until August 3.
The MAS aims to protect consumers from potential losses due to the high risk and speculative nature of DPT trading. However, the regulator advises consumers to exercise utmost caution when trading cryptocurrencies, as there may still be delays in recovering assets in case of service provider insolvency. The MAS also warns against dealing with unregulated entities, including those based overseas, as there is a risk of losing all assets.
While Singapore strengthens its regulatory regime for the crypto sector, neighboring Hong Kong is actively seeking to attract more cryptocurrency firms to its region, highlighting the divergent approaches taken by these Asian financial hubs.