Singapore Proposes New Measures for Digital Payment Token Services

The Digital Payment Token (DPT) service providers in Singapore may be required to safely keep customers' assets under a statutory trust before the end of the year. This is according to new measures announced today (Monday) by the country's financial markets regulator.

The DPT service providers must separate customer funds from their own, conduct a daily reconciliation of the assets, and keep proper records, the MAS said. They are also required to disclose the risks involved in dealing with DPTs to their customers.

Lending and Staking Services

However, if the legislative amendments to the Payment Services Regulations are affected, the DPT service providers will be prohibited from facilitating lending and staking services for retail investors. According to the MAS, such activities are risky to retail investors and can only be provided to institutional clients.

The new measures follow a public consultation process on enhancing investor protection and regulating the DPT service providers, which was conducted by the MAS in October 2022. To have the new measures implemented, the regulator is now seeking public feedback and will reportedly publish a guideline on the implementation.

"While the segregation and custody requirements will minimize 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," the MAS cautioned.

Most recently, Finance Magnates reported that the Singaporean central bank released a report on a framework for creating interoperable networks for digital assets. The framework, dubbed 'Enabling Open and Interoperable Networks', aims to enhance safety and efficiency in digital asset networks.

MAS Curbs Asset Tokenization

Additionally, the MAS announced an elaborate expansion of the 'Project Guardian', which is an initiative that assesses the feasibility of asset tokenization and Decentral Finance (DeFi). Part of the plans is the establishment of the Project Guardian Industry Group which brings together more than ten financial institutions.

HSBC, Standard Chartered, Citi, and DBS have been selected in the initiative to conduct pilot studies on wealth management, fixed income, and foreign exchange. Commenting on the initiative, the MAS said that it would restrict the risks associated with digital assets, including stablecoins and CBDCs.

Similarly, the risks identified by the MAS have prompted regulators to impose tougher restrictions in the sector globally. For instance, since the collapse of FTX, the Securities and Exchange Commission (SEC) has sued major crypto exchanges, including Binance and Coinbase, for allegedly breaching the law.