- Singapore’s new regulations will enhance security and transparency.
- DPTSPs must segregate and hold customer assets separately.
- Retail investors are protected as DPTSPs are prohibited from facilitating lending.
Singapore’s Monetary Authority (MAS) has recently announced new regulatory requirements for Digital Payment Token Service Providers (DPTSPs) to enhance customer asset security and transparency. These measures, discussed in MAS’ October 2022 consultation paper, will be implemented by October 2023, according to Chainalysis.
1/7 The Monetary Authority of Singapore ?? announced new regulatory requirements for Digital Payment Token Service Providers (DPTSPs), covering the segregation and custody of customer assets and the facilitation of lending and staking services. Here’s what it means for DPTSPs:
— Chainalysis (@chainalysis) July 5, 2023
To safeguard customer assets, DPTSPs must segregate and hold customers’ Digital Payment Tokens (DPTs) in separate wallet addresses, instilling trust in the system. Additionally, according to the report, customer funds will be held with financial institutions in Singapore, ensuring further protection. DPTSPs will conduct daily reconciliations of customers’ assets, ensuring accuracy and accountability.
Recognizing the importance of security, at least 90% of customer DPTs must be stored in cold wallets. While this requirement is slightly lower than Hong Kong’s 98%, it remains a significant step towards fortifying asset protection. The movement of customer assets will be overseen by senior management and personnel based in Singapore, maintaining a controlled environment, while private keys themselves need not be stored onshore.
MAS has chosen to refrain from mandating the use of independent custodians at present due to limited market availability. Instead, DPTSPs will be required to maintain an operationally independent custody function separate from other business units. This approach ensures that customer assets are safeguarded and managed with the necessary expertise.
Moreover, DPTSPs will no longer be allowed to facilitate the lending and staking of retail customers’ assets. However, these services can still be offered to accredited and institutional investors, subject to risk disclosure and customer consent. This measure aims to protect retail investors from potential risks associated with such activities while promoting responsible investment practices.
Looking ahead, MAS is considering additional requirements to improve consumer access, including suitability requirements. These requirements, discussed in the October 2022 consultation paper, should have been covered in the recent announcements but may be implemented in the future.