Asian crypto hubs are introducing new lending bans, betting on retail investors


Asian crypto hub Singapore and neighboring Thailand released new guidelines for handling digital assets in two announcements on July 3.

Singapore’s six new requirements for crypto companies

The Monetary Authority of Singapore (MAS) has issued six new requirements for crypto companies to protect crypto investors. In addition to the new rules, MAS banned exchanges from offering loans or staking services to its retail users.

MAS said borrowing and staking are “generally unsuitable” for retail investors. However, the central bank said exchanges can continue to provide loans and staking services to its institutional and accredited investors.

In its new rules, MAS has directed exchanges to separate user and business assets and hold user assets in a legal trust.

The central bank noted:

“This [depositing user assets in a trust] reduces the risk of loss or misuse of client assets and facilitates the recovery of client assets in the event of a DPT [digital payment token] insolvency of the service provider.”

The exchanges registered in the city-state have until the end of the year to comply with the new rules.

Under the new guidelines, crypto exchanges must separate their custody activities from other units. This would ensure that the custody function is “operationally independent” from different business units and isolated from the associated risks.

The new rules dictate that crypto service providers must ensure the safety of user funds and maintain proper records that include daily reconciliation of user assets. More importantly, exchanges must ensure that access to and operational controls over customers’ digital assets remain within Singapore. The monetary authority has also demanded clear risk disclosures on exchanges.

According to a report by The Straits Times citing unnamed sources, while the rules came as no surprise, industry players in Singapore had hoped for more room for manoeuvre.

Follow more rules

MAS’s new rules come after it received public input on its consultation on improving investor protection launched in October 2022. MAS is seeking feedback on the draft changes to the Payment Services Regulations to incorporate the new requirements.

In addition, MAS today launched a separate consultation document on how to implement further requirements for crypto companies to curb unfair trading practices. The report lists legal provisions and the types of misconduct that are considered criminal, such as market manipulation and manipulation.

The requirements outlined in the document include active monitoring to detect unfair trading practices, careful handling of confidential information, and enforcing employee personal trafficking policies.

Risk warning, again

MAS reiterated its warning to the public to remain wary of cryptocurrency risk. The central bank noted that while the new rules will “minimize the risk of users losing assets”, in the event of bankruptcy, users will still experience “significant delays” in recovering assets.

It noted:

“MAS reminds the public that regulation alone cannot protect consumers from all losses given the extremely high risk and speculative nature of DPT trading.”

Therefore, investors should “exercise extreme caution” when trading crypto. As MAS said, there are chances of a total asset loss. The central bank added that investors should avoid dealing with unregistered local and international exchanges to avoid losing their crypto.

New Thai guidelines on digital assets

Thailand’s Securities and Exchange Commission has also issued new guidelines aimed at increasing transparency and reducing risk in the digital asset industry. The regulatory body has set explicit criteria for disclosures of risk warnings from digital currency operators and has introduced bans on certain services.

According to the commission, the new measures are designed to improve investor protection and ensure that traders are well informed about the inherent risks of digital currencies. After meetings in September and December 2022 and again in May 2023, the committee passed resolutions setting out risk disclosure requirements and the ban on certain services.

The new regulations explicitly prohibit digital asset companies from accepting digital currencies and using deposited assets for lending or investment purposes while promising returns to depositors.

The guidelines also aim to strike by prohibiting such companies from offering returns on the deposit of digital assets, unless it falls under promotional activities defined by Thailand’s SEC rules. Further, companies may not advertise or persuade the public to participate in such services.

In further regulatory developments of Asian markets, the South Korean National Assembly on Friday, June 30 passed the Virtual Asset User Protection Act, a comprehensive piece of legislation combining 19 crypto-related bills intended to regulate the industry, punish illegal financial activities and providing investors with protection following a series of crypto-related scandals in the country.

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