Singapore will require crypto firms by the end of this year to place user assets in trusts

Singapore will require crypto firms by the end of this year to place user assets in trusts

MAS also works to limit crypto service providers’ ability to facilitate lending or staking only for retail customers.

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Singapore’s central banks is introducing measures to improve market integrity and investor protection in the cryptocurrency sector.

The Monetary Authority of Singapore announced on July 3 that crypto service providers must hold client assets in a statutory fund by the end of the year.

The regulator stated that “this will reduce the risk of misuse or loss of assets of customers, and facilitate recovery of assets of customers in the event of an insolvency of a service provider of DPT [digital payments token]”.

The new measures of custody follow a public consultative on regulatory measures designed to reduce the risks for consumers in crypto trading. This consultation was launched October 2022. The MAS said that the consultation was met with “significant interest” by a broad range of respondents.

Singapore’s central Bank stated in its official response to public consultation that the majority of respondents agreed to allow digital payment token service provider (DPTSPs), to deposit the assets of their users into the same trust accounts as those of other users.

The MAS stated that “some respondents disagreed and suggested that DPTSPs be required to separate each customer’s assets into separate blockchain addresses,” The respondents said that individual custody separation could give customers greater transparency because it would allow them to verify and identify their own holdings.

The MAS required that crypto companies, in addition to custody requirements and proper bookkeeping and records, also conduct daily reconciliations of their customers’ assets. DPTSPs must also maintain operational and access controls on customers’ DPTs located in Singapore, and ensure that custody is independent of other business units.

The regulator is also working to develop a proposal that would restrict crypto service providers’ ability to facilitate lending or staking DPTs of their retail clients. However, DPT providers can continue to facilitate these activities for institutional investors and accredited investors.

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The MAS also noted that some respondents suggested allowing crypto companies to offer lending and staking, with retail customers’ consent. The regulator added that “others advocated a prohibition on these high-risk and speculative practices.”

“MAS will continue to monitor the market and ensure that consumer awareness of risk is maintained as it evolves, and take measures to ensure our measures are balanced and appropriate.”

Singapore’s crypto lending crisis in 2022 also had a significant impact on firms. Major local firms like Three Arrows Capital and Hodlnaut a data-amp=”https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegraph.com/news/3ac-10b-hedge fund gone bust with founders running/amp”>went bankrupt amid the bear market/a>. The crypto lending crisis of 2022 also had a significant impact on Singapore firms, as major firms such as Three Arrows Capital, Hodlnaut , and others went bankrupt during the bear market.

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