Singapore Adopts New Crypto Regulations Aiming at Custody, Lending, and Staking

By: Mark Jessy

Singapore Adopts New Crypto Regulations Aiming at Custody, Lending, and Staking

July 5, 2023 8:08 AM

Singapore has enacted new restrictions for digital currency service providers in an effort to improve investor safety and market integrity in the cryptocurrency business. 

The Monetary Authority of Singapore (MAS) will also ban loan and staking activities supported by crypto service providers for their retail users.

The Monetary Authority of Singapore (MAS) revealed on Monday "new standards for Digital Payment Token (DPT) businesses to safekeeping client assets  under a statutory trust before the close of the year." Singapore's central bank elaborated:

"This will reduce the risk of customer asset loss or misuse and facilitate customer asset recovery in the event of a DPT service provider's insolvency."

The central bank stated that these regulations were implemented in response to a public consultation held in October of last year "on regulatory measures to enhance protection for investors and maintain market integrity in DPT services." In an effort to implement these changes, the monetary authority has published proposed legislative revisions to the Payment Services Regulations and is requesting public comment.

The consultation was launched by MAS shortly before the collapse of cryptocurrency exchange FTX in November of last year. Temasek Holdings, a Singaporean government investment company, spent $275 million in FTX and wrote down the total value of its investment after the crypto startup declared bankruptcy.

On Monday, Singapore's central bank said that it too would limit crypto lending and staking. According to the press release:

"MAS will also prohibit DPT service providers from supporting retail customer lending and staking of DPT tokens."

The regulator stressed that "these activities are generally not suitable for the retail public." However, MAS noted that DPT service providers can continue to support such operations for their institutional and authorized clients.

In addition, MAS issued a warning to investors, saying, "while the segregation and custody requirements will minimize the risk of loss of customers' assets, clients could still encounter major obstacles in recovering their assets in the event of insolvency of the service providers." "Consumers must also remain vigilant and avoid dealing with unlicensed entities, including those based overseas," the central bank cautioned.