FILE PHOTO: Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
SINGAPORE: Life is about to become harder for cryptocurrency firms in Singapore, particularly those that are licensed or trying for one and still run operations that will flout impending new rules by the regulator.
Market sources, who did not want to be named, said there would be no surprises as to what the regulator will roll out, although industry players had hoped for more room to manoeuvre.
The Monetary Authority of Singapore (MAS) is expected to set out plans to regulate the crypto sector by mid-2023, according to an earlier parliamentary reply.
This follows its public consultation in October 2022 when it had asked for feedback from stakeholders on its proposed parameters for the sector as it sought to put in place safeguards for retail investors.
Among the suggestions that the market is expecting to be rolled out is that licensed firms will not be allowed to carry out highly profitable activities known as lending and staking of retail investors’ digital assets – a move that will hit crypto exchanges hard, said the sources.
Staking is the process in which crypto companies lend digital tokens to other firms in the sector to earn large amounts of interest.
The October 2022 consultation documents had proposed that crypto companies licensed under the Payment Services Act, which governs digital asset transactions, must not lend out retail investors’ digital tokens.
There will also be audit requirements on retail customers’ digital wallets in a step to ring-fence assets of retail investors here, The Straits Times was told.
An observer who is familiar with the discussions and wanted to remain anonymous said MAS “did give some leeway” in the area of custody of customers’ digital assets, but did not elaborate further.
The regulator had earlier suggested that all customers’ digital assets are to be held by independent third-party custodians.
Another source said “the general mood is not positive”, especially about the likely ban on lending and staking, although the sector generally welcomes retail investor safeguards.
He noted that compared with Singapore’s, Hong Kong’s regulations are generally much stricter on retail investor safeguards, as well as lending and staking.
“The United States Securities and Exchange Commission has launched lawsuits against the lending and staking products, so things in Singapore are relatively better. We are like the world’s tallest midget. Maybe we are the tallest, but still a midget,” the source said. — The Straits Times/ANN
