The Monetary Authority of Singapore (MAS) has unveiled new measures for Digital Payment Token Service Providers (DPTSPs) to secure the safety of customers' assets. These changes are expected to be implemented by October 2023.
I. Overview of New Measures
A. Key Requirements for DPTSPs
1. Safekeeping of Customers' Assets in a Statutory Trust:
DPTSPs must hold customers' assets in a statutory trust to mitigate the risk of loss or misuse.
This measure also aids in asset recovery in case of DPTSP insolvency.
2. Safeguarding Customers' Money:
DPTSPs are required to protect customers' funds.
This includes implementing proper asset reconciliation and maintaining accurate records.
3. Operational Independence for Custody Functions:
DPTSPs must ensure their custody functions are separate from other business units.
4. Clear Risk Disclosures to Customers:
DPTSPs should provide comprehensive risk disclosures to customers regarding the storage and management of their assets.
5. Daily Reconciliation of Customers' Assets:
DPTSPs are required to conduct daily reconciliations of customers' assets and maintain proper books and records.
6. Restrictions on Lending and Staking Activities:
DPTSPs are prohibited from enabling retail customers to participate in lending and staking activities with DPTs.
However, institutional and accredited investors can still participate in these activities.
B. Regulatory Measures on Market Integrity:
The MAS is consulting on measures to tackle unfair trading practices and market integrity risks in the DPT sector.
A separate consultation paper, titled 'Consultation Paper on Proposed Measures on Market Integrity in Digital Payment Token Services,' was released and concluded on 3 August 2023.
II. Implications for Consumers
1. Risk Awareness:
Despite the new measures, consumers are advised to exercise caution due to the risky and speculative nature of DPT trading.
Regulations alone may not protect consumers from all losses in DPT trading.
Asset segregation and custody requirements only minimize the risk of loss, and asset recovery may face delays in case of DPTSP insolvency.
2. Dealing with Unregulated Entities:
Consumers should avoid dealing with unregulated entities, including overseas ones, as it risks losing all their assets.
III. Implementation of Proposed Requirements:
MAS plans to implement these requirements in the Payment Services Regulations by October 2023.
DPTSPs are expected to comply with these new requirements by October 2023.
DPTSPs and consumers are encouraged to familiarize themselves with these measures and take appropriate actions to ensure the safety of assets and compliance with regulatory requirements.
If you have questions or need assistance navigating the new regulations, please contact us at Prokopiev Law Group. With a broad global network of partners, we have the expertise to ensure your compliance worldwide, providing the support and advice you need to safely and effectively manage your digital assets. Let us help you make the most of the crypto world while ensuring your security and compliance. Contact us today for more information and expert guidance.
The information provided is not legal, tax, investment, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be automatically generated. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information.
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