Singapore's MAS Mandates Cryptocurrency Companies to Safeguard Customer Assets in Trusts by Year-End

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The Monetary Authority of Singapore (MAS) announced on Monday that crypto service providers in Singapore will be required to place customer assets into a statutory trust by the end of the year to ensure their safekeeping.

The requirement arises following public consultation conducted by the MAS to strengthen customer protection, which commenced in October 2022.

"This will mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT (Digital Payment Token or Cryptocurrency) service provider’s insolvency," the MAS said.

The MAS has imposed limitations on cryptocurrency service providers, prohibiting them from enabling retail customers to participate in token lending and staking. However, institutional and accredited investors are still permitted to avail themselves of these services.

Singapore's central bank has also invited public input on proposed legislative amendments aimed at implementing the latest requirements.

“This latest tightening of retail access to crypto should be no surprise to anyone following the Singapore market,” said Angela Ang, Senior Policy Advisor for blockchain intelligence firm TRM Labs and former MAS regulator. “MAS’ decision to hold back on certain proposals, such as requiring an independent custodian for customer assets, shows it’s listening to the industry and is sensitive to practical considerations such as a dearth of third-party custodians.”

Ang also mentioned in an email to CoinDesk that Singapore's regulations for payment service providers are similar to those of other jurisdictions and are comparatively less stringent than Hong Kong's. Presently, Singapore mandates that 90% of customer cryptocurrency holdings be stored in crypto wallets, whereas Hong Kong's requirement is set at 98%. Additionally, unlike in Hong Kong, there is no obligation for cold wallets to be located onshore in Singapore.

The MAS has expressed the possibility of revisiting its stance in the future regarding the prohibition of crypto entities from facilitating token lending and staking services for retail customers.

“Some respondents suggested to allow DPT service providers to offer these activities with the retail customer’s consent and risk disclosures, while others advocated a ban on these high-risk and speculative activities,” the MAS said. “MAS will monitor market developments and consumer risk awareness as these evolve, and will take steps to ensure that our measures remain balanced and appropriate.”

Singapore's commitment towards supporting technologies of the industry to improve existing traditional financial systems goes hand in hand with its stated objective of being "brutal and unrelentingly hard" on bad behaviour in the crypto industry. Last month, the MAS also proposed ways to design open, interoperable networks for tokenized digital assets and standards for the use of digital money.

Source Coindesk