Singapore Requires Crypto Firms to Hold Customer Assets in Trusts
The Monetary Authority of Singapore (MAS) is implementing new measures to enhance investor protection and market integrity in the cryptocurrency industry. MAS announced that crypto service providers will be required to hold customer assets in a statutory trust by the end of the year. This move aims to reduce the risk of loss or misuse of customers' assets and facilitate asset recovery in case of a digital payment token service provider's insolvency.
The new custody requirements were formulated following a public consultation launched in October 2022 to address risks associated with crypto trading and received significant interest from various respondents. While most respondents agreed that digital payment token service providers (DPTSPs) should be allowed to deposit user assets in the same trust account as other users, some suggested that individual custody segregation, with separate blockchain addresses for each customer's assets, would provide greater transparency and verification for customers.
Proper book-keeping required
Apart from the requirement for custody, the MAS has mandated that crypto companies perform daily reconciliation of customer assets and maintain proper books and records. Digital payment token service providers (DPTSPs) must also ensure that access and operational controls for customers' assets in Singapore are maintained, and the custody function operates independently from other business units.
Furthermore, the regulator is considering a proposal to restrict crypto service providers from facilitating lending or staking of DPTs for retail customers. However, for institutional and accredited investors, such activities may continue.
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