Singapore’s central bank, the Monetary Authority of Singapore (MAS), has unveiled a series of new measures to enhance the safety of customer assets held by crypto service providers in a significant move aimed at bolstering investor protection and market integrity within the cryptocurrency industry. These measures, introduced following a comprehensive public consultation, seek to mitigate the risk of asset loss or misuse while promoting transparency and recovery mechanisms.
The MAS directive requires crypto service providers to hold customer assets in a statutory trust by the end of the year. By doing so, the regulator aims to safeguard customer assets and facilitate their recovery in the event of insolvency. The move is a proactive step towards instilling greater confidence in the rapidly expanding digital payment token sector.
Responding to public feedback, the MAS acknowledged the benefits of both custodial options proposed during the consultation. While the majority of respondents favored allowing crypto service providers to pool user assets in a shared trust account, some advocated for individual custody segregation to provide enhanced transparency and verification capabilities. The MAS, committed to maintaining a balanced approach, has implemented the former option to safeguard customer interests.
In addition to custody requirements, the MAS has mandated daily reconciliation of customer assets and proper record-keeping for crypto companies. Furthermore, the regulator emphasizes the need for operational independence of custody functions and the maintenance of robust access and controls to customers’ digital payment tokens within Singapore.
The MAS is also actively working on a proposal to restrict lending and staking services for retail customers, aiming to mitigate potential risks associated with these activities. However, the restriction would not apply to institutional and accredited investors. The proposal has garnered mixed responses, with some respondents suggesting informed consent and risk disclosures as a condition for offering these services, while others advocating for a complete ban on such high-risk and speculative activities.
These new measures come as Singapore’s crypto sector grapples with recent industry implosions and challenges, such as the FTX incident, which resulted in significant financial losses for customers. Moreover, the crypto lending crisis of 2022 caused several local firms, including Three Arrows Capital and Hodlnaut, to go bankrupt amidst the bear market.
The MAS remains committed to monitoring market developments and consumer risk awareness, ensuring that their regulatory measures adapt and remain appropriate over time. These proactive steps signify Singapore’s determination to establish a robust and trustworthy crypto ecosystem, striking a delicate balance between fostering innovation and safeguarding investor interests.
Additionally, the MAS has been actively engaging with international counterparts to strengthen regulatory cooperation and address cross-border challenges in the cryptocurrency industry. By collaborating with global partners, Singapore aims to establish itself as a leading global hub for responsible and secure cryptocurrency services, attracting international investors and fostering the growth of blockchain-based innovations within the country.