Singapore is set to introduce new requirements for cryptocurrency companies, signaling a tightening of regulations in the city-state. The Monetary Authority of Singapore (MAS) has announced a draft legislative amendment that will force crypto companies to hold customer funds in a legal trust. The aim is to mitigate the risk of loss or misuse of customer assets and enable asset recovery in the event of bankruptcy.
Under the proposed regulations, digital payment token (DPT) service providers will also be required to carry out daily reconciliations, maintain proper records, and operate custodial services independently. In addition, they need to provide customers with clear risk disclosure regarding the custody of their assets. These steps follow a public consultation on the crypto sector that was held in October.
Singapore is also pushing to restrict crypto firms from offering lending and staking services to retail customers. While self-staking will still be permitted, crypto platforms will be limited to facilitating staking arrangements and lending retail customer assets.
The new terms, currently in the draft stage, are open for public comment before being passed into law. They will be incorporated into the 2019 Payment Services Regulations through guidelines and amendments. Public feedback on the proposed regulations is being accepted until August 3.
MAS aims to protect consumers from potential losses due to high-risk and speculative DPT trading. However, regulators advise consumers to exercise extreme caution when trading cryptocurrencies, as there may still be delays in asset recovery in the event of a service provider’s bankruptcy. MAS also warns against dealing with unregulated entities, including those based offshore, as there is a risk of losing all assets.
While Singapore is strengthening its regulatory regime for the crypto sector, neighboring Hong Kong is actively trying to attract more cryptocurrency companies to its territory, highlighting the different approach taken by this Asian financial center.