Crypto experts react to Singapore’s latest rules for digital asset platforms

The crypto ecosystem is reacting to the latest regulatory news coming from Singapore, with its financial watchdog MAS announcing it will require cryptocurrency exchanges to keep customer assets in a trust as part of efforts to ensure funds are safeguarded following the implosion of FTX in November.

Additionally, the city-state also plans to push ahead with a proposal to ban lending and staking for retail investors – a move that was closely followed by Thailand, whose SEC’s outright ban specifically applies to “depository services that offer returns to depositors and lenders,” effectively prohibiting crypto exchanges from offering lending and staking services.

“No doubt shaped by the high-profile failure of local hedge fund Three Arrows Capital”

AltTab Capital’s Michael Silberberg and ETC Group’s Bradley Duke came forward to comment on Singapore’s announcement, namely requiring Digital Payment Token (DPT) service providers to safe keep customer assets under a statutory trust before the end of the year.

Such safekeeping is expected to 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, the regulator argues.

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, said MAS, adding that consumers must also remain vigilant and not deal with unregulated entities, including those based overseas, as they risk losing all their assets.

Michael Silberberg, Head of Investor Relations at AltTab Capital, said: “While the intention behind separating customers from business assets is in the right place, there must be a carefully thought-out definition of what is and is not a trust. Over the last cycle, we’ve seen the dissolution of both custodians and exchanges. There will be a certification process for “qualified custodians” in the regulation with definitions of cryptographic key management and operational structures. We see a trend worldwide of “regulated custodians,” many of which are small companies with an institutional ledger and a metamask in domiciles where regulation just means “filed as a company. More counterparties does not necessarily mean more security.”

Bradley Duke, co-CEO at ETC Group, commented: “The approach to crypto regulation taken by the Monetary Authority of Singapore (MAS) has no doubt been shaped by the high-profile failure of local hedge fund Three Arrows Capital. At ETC Group, we welcome sensible regulation in crypto that lays down a clear framework bringing stability and comfort to both service providers and investors alike. The new regulation goes far including a ban on lending and staking for retail investors – but the MAS has stated that they could review that position in future. The regulator in Hong Kong, its regional rival in financial services, will surely be examining this new regulation closely.”