Image courtesy of 123rf.

Singapore’s top financial regulator issued a notice on 3rd July ordering crypto service providers in the region to transfer all user funds to a statutory trust before the end of the year. The decision comes a month after the regulator asked crypto firms to conduct more rigorous customer due diligence.

MAS Bans Lending and Staking, Orders Transfer of User Funds

The Monetary Authority of Singapore (MAS) outlined new requirements for digital asset service providers, asking them to transfer their customer assets to a statutory trust before the end of 2023. The central bank expects the new rules to “mitigate the risk of losses or misuse of customers’ assets, and facilitate the recovery of customers’ assets” in case of insolvency.

In addition, MAS also banned digital asset firms from offering digital token lending and staking services to their retail clients. The MAS views lending and staking services as unsuitable for the retail public. That said, digital payment token (DPT) service providers can offer such products to their institutional and accredited customers under the regulations.

The move comes several months after the MAS issued a public consultation on regulatory measures to improve investor protection and digital asset market integrity following a series of high-profile collapses in the industry last year.

Last month, the MAS published a whitepaper on purpose-bound money (PBM), a new protocol designed to identify digital money’s conditions. This solution allows those who send the funds to determine specific transfer conditions, such as how long the money is valid and on which platforms it can be used.

Singapore Will Be “Brutal and Unrelentingly Hard” on Bad Behavior in Crypto

In recent years, Singapore has been viewed as one of the most crypto-friendly nations due to its progressive regulatory approach, supportive government initiatives, and robust infrastructure for blockchain and cryptocurrency businesses. However, the recent market downturn highlighted by the collapses of several major firms forced the MAS, the city-state’s central bank and top financial regulator, to change its approach.

In June, the bank’s chief fintech officer Sopnendu Mohanty said the watchdog would be “brutal and unrelentingly hard” on bad behavior in the digital asset industry. In his interview with the Financial Times, Mohanty raised concerns about the value of private crypto tokens, adding he expected a state-backed alternative to be rolled out within three years.

Singapore’s shift in regulatory approach came in May 2022 after the collapse of the Terraform ecosystem, which wiped out $40 billion from crypto markets. The implosion of the Singapore-based crypto firm caused a domino effect, pushing other crypto-related companies, such as Three Arrows Capital, into bankruptcy.

More By This Author:

Apple’s Market Cap Is Now Bigger Than Five Sectors Of The S&P 500
Fidelity Has Written Down Its Reddit Stake By 47% As Site Enters A New Era
BCH Up 113% In A Week As Traders Expect Altcoin Season