Singapore Authorities Consider Restricting Use of Staking Services for Individual Investors


Mandatory new investor protection measures

The Monetary Authority of Singapore (MAS), the central bank of Singapore, has announced new investor protection measures for service providers of digital payment tokens (DPT) such as crypto assets (virtual currencies).

By the end of 2023, Digital Payment Token (DPT) service providers will need to adhere to the following key requirements to safely store customer assets under statutory trusts:

  • Keep customer assets separate from your own assets.
  • Reconcile client assets daily and maintain appropriate books and records.
  • Ensure that the custody function is operationally independent from other business units.
  • Clearly disclose to users the risks associated with custody of customer assets by DPT service providers.

Suggest limits on lending and staking

Additionally, the Monetary Authority of Singapore (MAS) said it is preparing a proposal to restrict DPT service providers from offering cryptocurrency lending and staking services to retail customers.

MAS explains that the reason for this is that such activities are generally not suitable for retail customers (individual investors). On the other hand, it said it could continue to provide lending and staking brokerage services for institutional and accredited investors.

What is staking

By owning a specific virtual currency, you contribute to the management of the blockchain network of that currency and receive rewards in return. Strictly speaking, it is necessary not only to hold virtual currency, but also to deposit it on the network. It can be said to be similar to a system in which legal currency is deposited in a bank account and interest is received after a certain period of time. Staking can be done in currencies that use the PoS (Proof of Stake) consensus algorithm.

▶Cryptocurrency Glossary

This announcement follows the consultation document released by the Monetary Authority of Singapore (MAS) in October last year and the comments it received.

At this time, MAS proposed restrictions on cryptocurrency leverage trading and lending by retail investors against the backdrop of consumer protection. At the same time, we also issued an agreement on stablecoins.

This time, we announced that we will prepare specific proposals for lending and staking restrictions, but there is no mention of restrictions such as leverage trading at this time.

connection: Singapore Authority Proposes Restrictions on Cryptocurrency Leveraged Trading

Agreement to prevent illegal transactions

On the 3rd, MAS issued a new consultation document on rules to keep the cryptocurrency market sound.

DPT service providers propose requirements to prevent unfair trading, such as wash trading, price manipulation based on false information, and insider trading. It also touches on the relevant legal provisions and the types of unlawful acts that are considered criminal.

MAS also called out to general consumers about the risks of cryptocurrency trading. “Given the high risk and speculative nature of the market, regulation alone cannot protect consumers from all losses.”

The MAS is in the form of a warning as follows:

Segregation and custody requirements for customer assets minimize the risk of customer asset loss, but consumers may still be unable to get their assets back for a long time if the service provider goes bankrupt.

Consumers should always be vigilant against doing business with unregulated companies, including those based abroad.

In particular, MAS has taken a policy of tightening regulations after a series of bankruptcies of virtual currency companies in 2022 and sloppy management at some companies were discovered.

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