Asian Crypto Hubs Introduce New Lending and Staking Bans for Retail Investors

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Asian crypto hub Singapore and neighboring Thailand released new digital asset management guidelines in two announcements on July 3.

Six new Singapore requirements for crypto businesses

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

MAS said lending and staking are generally not suitable for retail investors. The central bank, however, said exchanges could continue to provide lending and staking services to its institutional and accredited investors.

In its new rules, MAS ordered exchanges to separate user and company assets and hold user assets in a legal trust.

The central bank noted:

This [depositing user assets in a trust] mitigate the risk of loss or misuse of client assets and facilitate the recovery of client assets in the event of a TPD [digital payment token] insolvency of service providers.

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

According to the new guidelines, crypto exchanges must separate their custody business from other units. This would ensure that the custody function is operationally independent of different business units and insulated from associated risks.

The new rules state that crypto service providers must ensure the safety of user funds and maintain proper records with daily reconciliation of user assets. Most importantly, exchanges must ensure that access and operational controls over customer digital assets remain in Singapore. The monetary authority also demanded clear information on stock market risks.

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

More rules to come

The new MAS rules come after receiving public comments on its consultation on strengthening investor protections launched in October 2022. MAS is seeking comments on draft amendments to the Payment Services Regulations to integrate the new requirements.

Additionally, MAS today launched a separate consultation paper on implementing additional requirements for crypto businesses to combat unfair business practices. The report sets out the legislative provisions and the types of misconduct considered to be offences, such as market rigging and manipulation.

The requirements set out in the document include active monitoring for unfair business practices, careful management of confidential information and the maintenance of personal dealing policies by employees.

Risk warning, again

MAS reiterated its warning to the public to beware of the risks associated with cryptocurrencies. The central bank noted that while the new rules will minimize the risk of loss to users’ assets, in the event of bankruptcy, users will still face significant delays in recovering assets.

He 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 utmost caution when trading crypto. As MAS said, there are chances of total loss of assets. The central bank added that investors should not engage in unregistered local and international exchanges to avoid losing their crypto.

New Thai Digital Asset Guidelines

The Thai Securities and Exchange Commission has also issued new guidelines aimed at increasing transparency and reducing risk in the digital asset industry. The regulator established explicit criteria for risk warning disclosures from digital currency operators and introduced bans against certain services.

According to the committee, the new measures are designed to strengthen investor protections and ensure that traders are well informed of the inherent risks associated with digital currencies. Following meetings in September and December 2022 and again in May 2023, the committee approved resolutions establishing risk disclosure requirements and the prohibition of certain services.

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

The guidelines also target staking by prohibiting these companies from offering returns on the deposit of digital assets unless it falls under promotional activities defined by Thai SEC rules. Also, companies are not allowed to advertise or persuade the public to engage in such services.

In other Asian market regulatory developments, on Friday, June 30, South Korea’s National Assembly passed the Virtual Asset User Protection Act, comprehensive legislation combining 19 crypto-related bills intended to regulate the industry, punish illicit financial activity, and provide investor protection following a series of crypto-related scandals in the country.

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