Regulations for digital payment token service providers expanded to include foreign customers
Yong Hui Ting
ALL retail consumers of Singapore-regulated crypto providers will, from the middle of 2024, have to fall in with regulatory measures aimed at safeguarding consumers’ interests, the Monetary Authority of Singapore (MAS) said on Thursday (Nov 23).
This means that even foreign retail customers who engage the services of locally regulated digital payment token service providers (DPTSPs) – such as cryptocurrency exchanges and trading firms – will be bound by the regulations.
The existing rules include the barring of lending or staking activities on retail customers’ assets, and disallowing leverage options for retail clients.
The announcement came with the financial regulator’s publishing of its final tranche of responses to the feedback it has received on its proposed regulations for locally-based DPTSPs, which are to be implemented through regulations and guidelines from mid-2024.
Under the tightened rules, DPTSPs must assess whether a retail customer has sufficient knowledge of the risks of its services.
They must also identify and mitigate conflicts of interest, particularly if the institution conducts multiple services in the same vertical, such as when it does in-house trading while serving as an exchange.
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DPTSPs are also barred from offering incentives to retail customers, and be required to publish token listings and governance policies.
They are also not to accept credit card payments. MAS said this is aimed at closing off “easy access to debt financing”, which goes against the regulator’s policy intent of restricting purchases of cryptocurrencies on credit.
However, the rule against using credit cards applies only to locally-issued cards.
Foreigners, who may otherwise be unable to make payments, would still be allowed to use foreign-issued credit cards to pay for services offered by DPTSPs.
MAS said in its report: “The concession for foreign-issued credit cards recognises that there are limited payment alternatives available to a foreign retail customer, as compared to a retail customer in Singapore, who is able to make use of other payment modes.”
Accredited or institutional investors will be exempted from the rules.
Singapore’s Securities and Futures Act defines accredited investors as those with more than S$2 million in net personal assets, among which the net value of the individual’s primary residence is capped at S$1 million; accredited investors also include those individuals with more than S$1 million in net financial assets, or with over S$300,000 in income over the preceding 12 months.
Crypto may be considered as part of these individuals’ net assets when assessing whether they make the cut as accredited investors.
But a haircut of at least 50 per cent, or only up to S$200,000 – whichever is lower – would be taken into account when valuing these investors’ net worth, said MAS.
However, this rule of assessing if an individual is an accredited investor will not apply to MAS-regulated stablecoins.
MAS said the measures announced on Thursday will add on to earlier proposed amendments to the Payment Services Regulations, which require DPTSPs to:
- Segregate customers’ assets from providers’ own assets;
- Hold customers’ assets in trust;
- Conduct a daily reconciliation of customers’ assets; and
- Maintain access and operational controls to customers’ digital payment tokens in Singapore.
Ho Hern Shin, deputy managing director for financial supervision at MAS, said that while these measures can help safeguard consumers’ interests, they cannot insulate customers from losses associated with the “inherently speculative and highly risky nature of cryptocurrency trading”.
She urged consumers to remain vigilant and exercise utmost caution when dealing in such token services.
She also warned them against dealing with unregulated entities, including those based overseas.
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