Singapore's Central Bank Enhances Crypto Market Integrity

Singapore's Central Bank Enhances Crypto Market Integrity
The Monetary Authority of Singapore (MAS) has announced new measures aimed at improving investor protection and market integrity in the cryptocurrency industry. The regulatory requirements, set to be implemented by year-end, will mandate that crypto service providers hold customer assets in a statutory trust. This move is intended to reduce the risk of loss or misuse of customer assets and facilitate asset recovery in the event of a service provider's insolvency.

The MAS initiated a public consultation on regulatory measures to mitigate risks to consumers in crypto trading in October 2022. The consultation received substantial interest from a diverse range of respondents. 

In response to the feedback, the MAS stated that most respondents agreed that digital payment token service providers (DPTSPs) should be allowed to deposit user assets in the same trust account as other users. However, some respondents disagreed and suggested that DPTSPs should be required to segregate each customer's assets in separate blockchain addresses to enhance transparency and verification.

In addition to custody requirements, the MAS has mandated that crypto companies conduct daily reconciliation of customer assets and maintain proper books and records. DPTSPs must ensure that the custody function is operationally independent from other business units and maintain access and operational controls to customers' digital payment tokens (DPTs) in Singapore.

The MAS is also considering a proposal to restrict crypto service providers from facilitating lending or staking of DPTs for retail customers. However, such activities may still be allowed for institutional and accredited investors. 

Respondents to the public consultation suggested various approaches, including obtaining customer consent and providing risk disclosures for lending and staking activities, while others advocated for a complete ban on these high-risk and speculative activities.

The new regulatory developments in Singapore are aimed at addressing issues such as industry implosions and the crypto lending crisis that occurred in 2022. These incidents resulted in significant financial losses for customers and the bankruptcy of major local firms. The MAS will continue to monitor market developments and consumer risk awareness to ensure that the regulatory measures remain balanced and appropriate.

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