The Monetary Authority of Singapore (MAS) has introduced cryptocurrency-related amendments to the Payment Services Act, focusing on digital payment token (DPT) service providers. Alongside this, it has published guidelines for digital asset custody.
The Act has been expanded to regulate three types of additional services:
- Digital asset custody
- Payments or transfers involving tokens, even if the service provider does take possession of the DPTs
- Cross-border payments, regardless of whether the funds are within Singapore.
The announcement includes transitional arrangements for existing providers who need to become licensed. These providers must notify MAS within 30 days.
MAS also provided detailed guidelines concerning digital asset custody following a consultation and an outline of the pending rules last November.
Digital asset custody guidance
Under the new guidance, customers’ digital assets held in trust must be segregated from the assets of the service provider, though it stops short of mandating the use of an external custodian.
A significant portion, ninety percent, of customer assets must be stored offline in cold wallets. The guidelines also emphasize the importance of not allowing a single individual to control customer assets. Yet, the regulations are less strict for smaller firms, where effectively two individuals could manage control.
Many service providers opt for multi-party computation (MPC) wallets, which divide the private keys into several shares. MAS deems it acceptable for transactions to proceed if at least two out of three shares are needed for approval.
MAS has consistently voiced concerns that cryptocurrencies are unsuitable investments for retail consumers. Accordingly, the guidelines mandate that service providers prevent retail customers from engaging in activities like pledging, lending, or staking their digital assets.
Other guidelines include managing conflicts of interest, disclosing information to customers, and issuing monthly statements. MAS established these rules after extensive consultations.
