In a significant move to regulate the burgeoning cryptocurrency market, the Monetary Authority of Singapore (MAS) has released its set of responses to the feedback on proposed regulations for Digital Payment tokens (DPT) service providers in Singapore. This announcement, made on November 23, 2023, marks a pivotal step in the country’s efforts to establish a more controlled and secure environment for digital currency transactions.
Strengthening business conduct and consumer protection
One of the key aspects of the new regulations is the focus on improving business conduct among DPT service providers. The MAS plans to issue detailed guidance to help these providers implement necessary measures effectively. These measures, which have garnered broad support from various stakeholders, include:
Identifying, mitigating, and transparently disclosing potential and actual conflicts of interest.
Publishing clear policies, procedures, and criteria for listing DPTs.
Establishing robust policies and procedures for handling customer complaints and resolving disputes.
These steps are designed to enhance the transparency and accountability of DPT service providers, ensuring that they operate with the highest standards of integrity and customer service.
In addition to these business conduct guidelines, the MAS is also introducing measures to regulate consumer access to DPT services. These measures are aimed at discouraging speculative trading of cryptocurrencies by retail customers. They include:
Assessing a customer’s risk awareness before granting access to DPT services.
Prohibiting the offering of incentives for cryptocurrency trading.
Banning financing, margin, or leverage transactions in cryptocurrencies.
Refusing payments made with locally issued credit cards.
Limiting the value of cryptocurrencies in determining a customer’s net worth.
These consumer access measures are expected to play a crucial role in protecting retail customers from the high risks associated with cryptocurrency trading.
MAS enhancing technology and cyber risk management
Recognizing the critical importance of technology and cybersecurity in the digital currency ecosystem, the MAS is setting stringent requirements for DPT service providers in these areas. These requirements are in line with the current standards imposed on financial institutions and include maintaining the high availability and recoverability of critical systems. This move is aimed at ensuring that DPT service providers are equipped to handle technological challenges and cyber threats effectively, thereby safeguarding the interests of their users.
The MAS’s regulatory measures on DPT services will be implemented through a combination of regulations and guidelines. These will be phased in from mid-2024, providing DPT service providers with a sufficient transition period to comply with the new standards.
A call for vigilance in cryptocurrency trading
Ms. Ho Hern Shin, Deputy Managing Director (Financial Supervision) at MAS, emphasized the responsibility of DPT service providers in safeguarding consumer interests. She acknowledged that while the new business conduct and consumer access measures are crucial, they cannot fully protect customers from the inherent risks associated with the speculative and volatile nature of cryptocurrency trading.
Ms Ho urged consumers to exercise caution and remain vigilant when dealing with DPT services. She also advised against dealing with unregulated entities, including those based overseas, highlighting the increased risks associated with such platforms.
The MAS’s latest regulatory measures represent a significant step towards creating a safer and more reliable digital currency environment in Singapore. By enhancing business conduct, protecting consumers, and strengthening technology and cyber risk management, the MAS aims to foster a more secure and stable digital payment ecosystem. These regulations, while stringent, are seen as necessary to navigate the complex and rapidly evolving landscape of cryptocurrency trading, ensuring that Singapore remains at the forefront of digital finance innovation while safeguarding the interests of its citizens.