The Monetary Authority of Singapore announces new crypto regulations – Will it Affect Market?

  • Under the new regulations, customer digital assets must be segregated from the service provider’s assets, offering an enhanced safeguard against the risks of misappropriation and insolvency.
  • A key feature of the updated guidelines is the requirement for service providers to store 90% of customer assets in cold wallets, which are not connected to the internet, thereby significantly reducing the vulnerability to cyber theft.

The Monetary Authority of Singapore (MAS) has announced the implementation of new financial regulations targeting the cryptocurrency industry.

The new regulations will enter into effect starting from April 4, 2024, targeting to extend the scope of the Payment Services Act (PSA) and subject digital payment token (DPT) service providers to more stringent regulatory supervision.

Under the new regulations, customer digital assets must be segregated from the service provider’s assets, offering an enhanced safeguard against the risks of misappropriation and insolvency. A key feature of the updated guidelines is the requirement for service providers to store 90% of customer assets in cold wallets, which are not connected to the internet, thereby significantly reducing the vulnerability to cyber theft.

The new regulations state that crypto firms should not have control over all of the crypto assets of their clients, aiming to reduce fraud and unauthorized transactions. While smaller firms are permitted a minor concession—requiring only two individuals to exercise control—many service providers are anticipated to adopt multi-party computation (MPC) wallets. These wallets distribute private key segments among multiple parties, necessitating at least two out of three segments to authorize a transaction.

Other measures issued include conflict of interest management, transparency to clients, and monthly account statements. The comprehensive regulations, borne from industry consultations, underscore SG’s acknowledgement of both the potential and pitfalls of the rapidly expanding crypto market. While pre-existing service providers have a grace period to rebrand to the newly required licensing conditions, they must, within nine months, present an external Auditor’s report. Failure to comply may lead to the shutdown of their SG operations.

Pablo Vazquez, Head of Operations at Meta Pool, remarked:

As Singapore emerges as a leading region for crypto industry growth in Southeast Asia, the establishment of clear regulations for industry participants becomes increasingly vital.

Singapore’s efforts to refine its crypto regulations are part of a broader strategy to position itself as a global epicentre for the digital asset sector. The MAS’s amendments to the PSA are designed to bolster consumer protection and uphold Singapore’s status as a secure and well-regulated financial hub. The full enforcement of the new measures is expected by October 4, 2024, marking a pivotal advancement in the nation’s regulatory landscape for digital assets.

The MAS’s introduction of these novel crypto regulations is indicative of Singapore’s dedication to cultivating a secure and enduring ecosystem for digital asset innovation and investment. As the crypto industry evolves, Singapore’s regulatory framework is poised to serve as an exemplar for other regions seeking to harmonize technological innovation with investor safeguarding.

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