Blockchain & Crypto

Singapore Tells Crypto Platforms to Keep Client Money in Trust

In Singapore, local authorities intend to require cryptocurrency exchanges to implement the practice of storing client assets in trust management as part of their activities.

Singapore Tells Crypto Platforms to Keep Client Money in Trust

This requirement stipulates that cryptocurrency exchanges must take the above measures by the end of this year. The relevant decision of the Singapore authorities is part of efforts to ensure the safety of customer funds after the collapse of FTX, which occurred in November last year.

Also in the city-state, the local monetary authority will propose to establish a ban on lending and placing rates for retail investors. The regulator announced the corresponding intention on Monday, July 3.

The Monetary Authority began consultations on limiting the possibilities of lending to retail investors in October last year. The discussions were initiated shortly before the FTX crash. These intentions are one of many proposals to tighten the regulation of digital assets in Singapore.

Last fall, the Monetary Authority, as part of the development of measures to ensure the safety of virtual assets and increase the level of control in this area, did not limit itself to the initiative to ban retail investors from taking loans. In October, the regulator also proposed to abolish the practice of companies using tokens deposited by investors of this category. In this case, it meant a ban on the use of accounting units for lending and placing bets in order to generate income.

The Central Bank of Singapore also stated in October that the level of volatility of digital currencies is very high, and leverage in these conditions can provoke large losses for customers. The financial regulator noted that the retail sector should lose the opportunity to use credit cards and other credit facilities to purchase tokens.

Singapore already has certain bans against the sphere of cryptocurrencies. For example, measures have been introduced in the city-state to restrict crypto marketing, according to which providers of virtual assets are required to have a local license. This requirement also applies to those companies that do business only abroad.

The Central Bank of Singapore in October rejected a proposal to introduce a complete ban on the interaction of cryptocurrency services and retail consumers. The financial regulator stated that this restrictive measure could cause the appearance of unlicensed platforms.

Chia Hok Lai, co-chairman of the Blockchain Association of Singapore, last fall, commenting on the initiatives and intentions of the authorities, said that such a roadmap, if implemented in full, is an excessive regulatory system. He also expressed the hope that the monetary authority will reconsider some proposals from the point of view of their expediency.

The Singapore authorities can theoretically change their intentions regarding the regulation of digital assets in the direction of mitigation, but with a high degree of probability, potentially possible adjustments will not fundamentally change the situation, since the city-state has taken a clearly defined course to tighten control measures in the field of cryptocurrencies.

The world practice regarding the regulation of the virtual asset industry is heterogeneous. This is confirmed by the fact that while Singapore is tightening regulation and narrowing the space of opportunities, Hong Kong is taking measures to attract as many private individuals and institutions as possible to this sector.

The Monetary Authority of Singapore recognizes that the rules do not guarantee the absence of losses for consumers against the background of significant risks and the speculative nature of trading digital payment tokens.

As we have reported earlier, Singapore Develops Uniform Standards for Aproving Crypto Bank Accounts.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.