Singapore introduces new measures to safeguard crypto assets

The move is meant to minimise losses in the event of cryptocurrency firms going bankrupt. The new rules mandate that digital asset firms licensed in Singapore will be required to segregate customers’ assets from their own and hold them on trust. Specifically, these companies will need to keep customers’ assets on a separate set of blockchain addresses from those used for the firm’s own assets. 

Digital payment token (DPT) firms will be required to conduct daily reconciliation of customers’ assets, keep proper records, and maintain access and operational controls of customers’ DPTs in Singapore. 

To make it easier to recover funds in the event of a firm’s insolvency, the MAS stated that it would allow DPT firms to deposit a customer’s assets in a trust account. Moreover, the assets must be safeguarded with financial institutions in Singapore. However, there is a limited number of established independent third-party custodians now, which is why the MAS will not make it mandatory to use independent custodians for customer assets, at least for now. 

Companies will need to make sure that the custody function is operationally independent of other business units. According to straitstimes.com, these new rules are expected to come into force in Singapore later in 2023.

Singapore’s interoperable digital asset networks

In June 2023, Singapore's central bank revealed its plans to come up with different ways to design open, interoperable networks for tokenised digital assets. The Monetary Authority of Singapore presented the framework in a report created in partnership with the Bank for International Settlements (BIS) and other financial institutions.  

The initiative is called Project Guardian and has enlisted 11 institutions to test asset tokenisation across financial asset classes. Pilot studies across wealth management, fixed income and foreign exchange will be carried out by banking entities such as HSBC, Standard Chartered, DBS and Citi, according to the announcement. 

While Singapore's central bank is not an advocate for crypto, it is committed to promoting technologies that have the potential to improve existing traditional financial systems. The MAS is actively engaged in restricting speculation in cryptocurrencies. However, the regulatory body acknowledges the potential for value creation and efficiency gains in the digital asset ecosystem. The MAS has proposed standards for the use of digital money, including central bank digital currencies (CBDCs) and stablecoins.