Singapore Crypto Firms To Keep Customer Assets In A Trust

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Cryptocurrency service providers in Singapore will have to keep customer assets under a statutory trust before the end of the year, for safekeeping purposes, the city state’s central bank announced Monday.

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The move is expected to reduce the risk of loss or misuse of customers’ assets. It would also help recover customers’ investments in case a crypto service provider becomes insolvent, the Monetary Authority of Singapore (MAS) said in a statement.
MAS will also restrict crypto service providers from lending and staking crypto tokens by their retail customers.
These measures follow an October 2022 public consultation on regulatory measures to improve investor protection and market integrity in cryptocurrency services.
MAS is seeking public feedback on the draft legislative amendments to regulations to put these requirements into effect.
“While the segregation and custody requirements will minimize the risk of loss of customers’ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers,” MAS said, pointing out that regulations alone cannot protect consumers from all losses.
MAS issued on Monday a separate consultation paper proposing requirements for crypto service providers to address unfair trading practices. MAS said it will also set out legislative provisions and the types of wrongful conduct that constitute offenses.
The central bank will receive comments on the proposed legislative amendments and regulatory measures to address market integrity risks till Aug. 3.

“MAS’ announcement today is a huge step forward for Singapore and a much-welcomed one,” Lasanka Perera, chief executive of crypto exchange Independent Reserve Singapore, said in an emailed statement.

“Given the wider loss of trust amid recent industry fallouts in the absence of such regulation, we see this as an inflection point for the crypto industry akin to tradfi [traditional finance], and a rite of passage as our industry matures. This not only underscores the regulator’s conviction to protect investors but will also undoubtedly inspire greater confidence from the corporate and institutional sectors with interest in this space,” Perera added.

However, Perera said that the latest requirements set forth by MAS will take time to work through as service providers may have to restructure parts of their businesses or operations in order to comply.

Singapore’s central bank has been tightening regulations since the beginning of last year when it restricted crypto exchanges from publicly advertising their services. MAS has also issued repeated warnings to retail customers to stay away from crypto trading and has said cryptocurrencies have no fundamental value.