Thursday, 28 September 2023

MAS publishes investor protection measures for Digital Payment Token services

5 min read

The Monetary Authority of Singapore (MAS) announced new requirements for Digital Payment Token (DPT) service providers to safekeep customer assets under a statutory trust before the end of the year.

This will mitigate the risk of loss or misuse of customers’ assets, and facilitate the recovery of customers’ assets in the event of a DPT service provider’s insolvency. MAS will also restrict DPT service providers from facilitating lending and staking of DPT tokens by their retail customers.

These measures are introduced following an October 20221 public consultation on regulatory measures to enhance investor protection and market integrity in DPT services. The consultation received significant interest from a wide range of respondents, with broad support for DPT service providers to:

• Segregate customers’ assets from its own assets and held in trust;
• Safeguard customers’ money;
• Conduct daily reconciliation of customers’ assets and keep proper books and records;
• Maintain access and operational controls to customers’ DPT in Singapore;
• Ensure that the custody function is operationally independent from other business units; and
• Provide clear disclosures to customers on the risks involved in having their assets held by the DPT service provider.

MAS is now seeking public feedback on the draft legislative amendments to the Payment Services Regulations here to put these requirements into effect. MAS will also publish guidelines in due course to support consistent implementation by the industry.

MAS will proceed with the proposal to restrict DPT service providers from facilitating lending or staking of their retail customers’ DPT, as these activities are generally not suitable for retail public. DPT service providers may continue to facilitate such activities for their institutional and accredited investors. There were diverse views received on this proposal.

Some respondents suggested allowing DPT service providers to offer these activities with the retail customer’s consent and risk disclosures, while others advocated a ban on these high-risk and speculative activities. MAS will monitor market developments and consumer risk awareness as these evolve, and will take steps to ensure that our measures remain balanced and appropriate.

MAS also consulted on the broad regulatory approach to market integrity in the October 2022 public consultation. Most respondents agreed with MAS’ observations on good industry practices to address market integrity risks, and some respondents suggested that MAS should impose further measures to prevent market abuse and unfair trading practices.

To follow up more specifically, MAS is issuing today a separate consultation paper proposing requirements for DPT service providers to address unfair trading practices. It will also set out legislative provisions and the types of wrongful conduct that constitute offences.

MAS reminds the public that regulations alone cannot protect consumers from all losses, given the extremely high risk and speculative nature of DPT trading. Consumers must continue to exercise utmost caution when trading in DPT, as they may lose their assets. While the segregation and custody requirements will minimise the risk of loss of customers’ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers. Consumers must also remain vigilant and not deal with unregulated entities, including those based overseas, as they risk losing all their assets.


Re-disseminated by The Asian Banker

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