Singapore Tightens Crypto Rules on Custody, Lending, and Staking Services

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Singapore, one of the most crypto-friendly jurisdictions in the world, has recently announced new regulations that will affect various aspects of the crypto industry, such as custody, lending and staking. The new rules are part of the Payment Services Act (PSA), which came into effect in January 2020 and aims to provide a comprehensive framework for regulating payment services in the country.

According to the Monetary Authority of Singapore (MAS), the central bank and financial regulator, the new regulations are intended to address the risks and challenges posed by emerging payment methods and technologies, such as cryptocurrencies. The MAS stated that the new rules will enhance consumer protection, promote confidence in payment systems and foster innovation.

The new regulations will require crypto service providers to obtain a license from the MAS and comply with various requirements, such as anti-money laundering (AML), counter-terrorism financing (CTF), cybersecurity and consumer protection. The MAS has also introduced a new category of license for digital payment token (DPT) services, which covers activities such as buying, selling or facilitating the exchange of cryptocurrencies, as well as providing custody, lending or staking services for cryptocurrencies.

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The new rules will have significant implications for crypto businesses operating in Singapore or targeting Singaporean customers. For instance, crypto custody providers will have to ensure that they have adequate safeguards to protect customer assets from loss or theft, such as using cold storage or multi-signature wallets. Crypto lending platforms will have to assess the creditworthiness of borrowers and disclose the terms and risks of their loans. Crypto staking platforms will have to inform customers of the potential rewards and risks of staking their tokens, such as volatility, liquidity and regulatory uncertainty.

The new regulations will also affect crypto users in Singapore, who will have to comply with certain obligations, such as verifying their identity and providing information on their transactions. The MAS has warned that customers who use unlicensed or overseas crypto service providers may not be protected by Singaporean laws and may face difficulties in recovering their funds in case of disputes or fraud.

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The new regulations are expected to come into force by the end of 2023, after a public consultation period and a transitional period for existing crypto service providers to obtain their licenses. The MAS has stated that it will adopt a risk-based and flexible approach to regulating the crypto industry, taking into account its evolving nature and diversity. The MAS has also expressed its support for the development of the crypto sector in Singapore, as part of its vision to become a global fintech hub.