The Digital Payment Token (DPT) service providers in Singapore may be required to safely keep customers' assets under a statutory trust before the end of the year. This is according to new measures announced today (Monday) by the country's financial markets regulator.

The DPT service providers must separate customer funds from their own, conduct a daily reconciliation of the assets, and keep proper records, the MAS said. They are also required to disclose the risks involved in dealing with DPTs to their customers.

Lending and Staking Services

However, if the legislative amendments to the Payment Services Regulations are affected, the DPT service providers will be prohibited from facilitating lending and staking Staking Staking is defined as the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. In particular, staking represents a bid to secure a volume of crypto to receive rewards. In most case however, this process relies on users participating in blockchain-related activities via a personal crypto wallet.The concept of staking is also closely tied to the Proof-of-Stake (PoS). PoS is a type of consensus algorithm in which a blockchain network aims to achieve Staking is defined as the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. In particular, staking represents a bid to secure a volume of crypto to receive rewards. In most case however, this process relies on users participating in blockchain-related activities via a personal crypto wallet.The concept of staking is also closely tied to the Proof-of-Stake (PoS). PoS is a type of consensus algorithm in which a blockchain network aims to achieve Read this Term services for retail investors. According to the MAS, such activities are risky to retail investors and can only be provided to institutional clients.

The new measures follow a public consultation process on enhancing investor protection and regulating the DPT service providers, which was conducted by the MAS in October 2022. To have the new measures implemented, the regulator is now seeking public feedback and will reportedly publish a guideline on the implementation.

"While the segregation and custody requirements will minimize the risk of loss of customers' assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers," the MAS cautioned.

Most recently, Finance Magnates reported that the Singaporean central bank released a report on a framework for creating interoperable networks for digital assets. The framework, dubbed 'Enabling Open and Interoperable Networks', aims to enhance safety and efficiency in digital asset networks.

MAS Curbs Asset Tokenization

Additionally, the MAS announced an elaborate expansion of the 'Project Guardian', which is an initiative that assesses the feasibility of asset tokenization Tokenization Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one represen Tokenization represents the process of substituting a sensitive data element with a non-sensitive equivalent, i.e. token, which bears no extrinsic or exploitable meaning or value. In essence, the rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset. For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one represen Read this Term and Decentral Finance (DeFi). Part of the plans is the establishment of the Project Guardian Industry Group which brings together more than ten financial institutions.

HSBC, Standard Chartered, Citi, and DBS have been selected in the initiative to conduct pilot studies on wealth management, fixed income, and foreign exchange. Commenting on the initiative, the MAS said that it would restrict the risks associated with digital assets, including stablecoins and CBDCs.

Similarly, the risks identified by the MAS have prompted regulators to impose tougher restrictions in the sector globally. For instance, since the collapse of FTX, the Securities and Exchange Commission (SEC) has sued major crypto exchanges, including Binance and Coinbase, for allegedly breaching the law.