On October 26, 2022, the Monetary Authority of Singapore (MAS) released two consultation papers namely, the Proposed Regulatory Measures for Digital Payment Token Services and the Proposed Regulatory Approach for Stablecoin-Related Activities. The MAS has requested input from stakeholders on both papers.
The MAS has continued in its drive to point out the risks associated with cryptocurrency speculation and also warned the public on how cryptocurrencies may also be used for illicit purposes. The MAS said some consumers had fallen victim to crypto hacks and scams.
The MAS further pointed out that some security mechanisms that allow customers to access their cryptocurrencies and the immutability of transactions may result in consumers permanently losing their cryptocurrencies.
Amongst the proposed regulatory measures, the MAS requests Digital Payment Token Service Providers (DPTSPs) to put in place consumer access measures and thresholds for retail customers as they can access less professional advice and have fewer resources to protect their interests, as compared to institutional investors.
The MAS further proposes that DPTSPs should assess whether retail customers know the risks of DPT services before providing such services. Suppose retail customers do not have sufficient knowledge of the dangers of trading in Digital Payment Tokens (DPTs). In that case, the MAS proposes that DPTSPs should provide educational resources to increase customer knowledge. The MAS invites comments on other steps that DPTSPs may take where the retail customer is found to be lacking sufficient knowledge of the risks associated with DPT services.
In addition, the MAS proposed that DPTSPs should not provide monetary or non-monetary incentives to retail customers to purchase any financial product or service or refer a DPT service to other retail customers.
The MAS also proposes that DPTSPs should not offer retail customers any credit facilities to purchase DPT services or to enter into leveraged DPTs transactions. The MAS also suggests not accepting retail customers’ credit or charge card transactions to provide DPT services.
To promote good business conduct, the MAS proposes that DPTSPs should ensure that customers’ assets are segregated from the DPTSPs’ assets and be held for the customer’s benefit. This is aimed at minimising the risk of loss or misuse of customers’ assets and facilitating the return of customers’ assets in the event of the insolvency of the DPTSP.
The MAS proposed the establishment of a complaints-handling unit that is not directly involved in the provision of DPT services for handling and resolving complaints in a fair and timely manner.
In the second consultation paper on the proposed regulatory approach for stablecoin-related activities, the MAS advised that it intends to focus on Single-currency pegged stablecoins (SCS) and on SCS issued in Singapore. However, the MAS seeks comments from interested parties on whether it should extend its regulatory powers to SCS issued outside of Singapore.
To maintain a high stability value, SCS issuers offering MAS-regulated SCS must hold reserve assets to back the SCS issued. The MAS proposes that reserve assets can only be held in cash, cash equivalents, or debt securities with no more than three months of residual maturity.
The MAS proposes that reserve assets must be valued on a marked-to-market basis daily, be equivalent to at least 100% of the par value of the outstanding SCS in circulation at all times, and be denominated in the same as the pegged currency.
The MAS has requested all interested parties to submit their written comments and feedback on the two consultation papers by December 21, 2022.