Singapore orders cryptocurrency firms to store assets in trusts

SHANGHAI ~ After major digital asset companies like FTX failed, Singapore announced on Monday that it will move forward with plans to tighten regulations on cryptocurrency companies. Digital Payment Token (DPT) service providers, as Singapore’s central bank and financial regulator name cryptocurrency participants, will soon be required by the Monetary Authority of Singapore to deposit their customers’ assets in a legal trust. “This will mitigate the risk of loss or misuse of client assets and facilitate the recovery of client assets in the event of a DPT service provider’s insolvency,” MAS said in a press release. Accordingly, “MAS will also prevent DPT service providers from facilitating the lending and staking of DPT tokens by their retail customers.”

To confirm transactions on blockchain, the underlying technology of cryptocurrencies, holders of virtual assets like Ether engage in a process called staking. If the deal is legit, the owner will get their tokens back plus a bonus. Until late last year, in December, the MAS invited cryptocurrency companies to comment on draft regulations. Several leading virtual asset providers, including cryptocurrency hedge fund Three Arrows Capital, Hodlnaut, Zipmex, Celsius Network and FTX, all suffered setbacks after the token price fell mid-last year. , prompting the authority to act.

The world’s largest cryptocurrency exchange, Binance, provided eight pages of commentary. Binance has proposed the “use of client disclosure and consent” to protect clients from the dangers of unregulated leverage, in response to the MAS proposal to ban companies from lending digital tokens owned by Binance. retail customers. Binance suggested that a bespoke strategy might be needed to determine whether or not crypto players should be mandated to hire an independent custodian to hold customer funds. “This may not always be operationally feasible and may in fact increase the security risk when a third-party custodian is required to hold client assets,” the conversation continued. According to Binance’s whitepaper, “various risks should be managed appropriately, but within regulatory safeguards.”

Despite these objections, MAS decided to move forward with its staking intentions and require service providers to place a client’s assets in a trust account alongside the assets of other clients. from the supplier. The MAS mentioned that “different perspectives were received”. For example, “some respondents suggested allowing DPT service providers to offer these activities with retail customer consent and risk disclosure”, while “others advocated prohibiting these high-value activities”. risk and speculative”. Lending or staking client assets, as the regulator put it, “is generally not suitable for (the) retail audience.” New regulations are expected to come into force in the third quarter of this year after being debated in Singapore’s parliament over the next few months.

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