Singapore's Regulator to Restrict Crypto Firms' Retail Client Operations

The Monetary Authority of Singapore (MAS) has implemented stricter regulations affecting digital payment token (DPT) service providers, placing limitations on their operations with clients making purchases for personal use. In a significant move, retail users are now barred from buying cryptocurrencies using local credit cards. Moreover, providers of virtual asset services will be prohibited from attracting such investors through free token distributions.

Under the new guidelines, cryptocurrency providers are mandated to inform customers about the risks associated with trading payment tokens, characterized by high volatility. They are strictly prohibited from offering leveraged trading activities. Additionally, exchanges and wallet operators are required to disclose potential conflict of interest scenarios, publish listing criteria for payment tokens, outline placement procedures, and present authorities with a policy for addressing customer complaints and dispute resolution.

To mitigate technological risks and potential cyber attacks, MAS demands that DPT entities adhere to heightened security standards equivalent to those required of traditional financial institutions.

The rules for companies dealing with digital assets are set to be gradually enforced starting from mid-2024, following legislative amendments. MAS assures that crypto firms will have ample time to ensure compliance with these regulations.

Previously, MAS proposed measures for DPTs to assess whether their clients are aware of the potential risks associated with trading before allowing investments in cryptocurrencies. In July, the authority released rules concerning the custody of client assets, emphasizing the protection of institutional crypto investors' rights. In August, the regulator introduced various frameworks for regulating stablecoins in Singapore, including requirements related to minimum reserve volumes.