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Clifford Chance

Clifford Chance


Talking Tech

Singapore moves ahead to tighten rules for digital payment token services

Crypto Banking & Finance 13 July 2023

Following from a consultation in October 2022, the MAS has announced that it will impose requirements for DPTSPs in Singapore to safekeep customer assets under a statutory trust. In the October 2022 consultation, the MAS proposed a suite of regulatory measures to enhance investor protection and market integrity in DPT services. This was driven by several high-profile cryptocurrency collapses in the country and a global push towards better governance of the cryptocurrency industry.

Segregation and custody

In the first part of its response to the feedback published on 3 July 2023 (July Response Paper), the MAS informed that the respondents to the October 2022 consultation were broadly supportive of the following proposals which MAS will proceed to implement. Amongst other things, the final proposals include:

  • segregation of customers’ assets – customers' assets are to be segregated from the DPTSP's own assets and held on trust on a separate set of blockchain addresses; individual customers' assets may be commingled in an aggregated pool which is to be kept separate from the DPTSP's own assets;
  • safeguarding of customers’ moneys – customers' moneys are to be safeguarded with financial institutions in Singapore;
  • daily reconciliation of customers’ assets – such reconciliation to be performed at entity-level in line with current requirements applicable to capital markets intermediaries;
  • books and record-keeping – transaction records are to be kept and separate books and records are to be maintained for each customer;
  • statement of accounts – to be provided monthly or on a real-time basis;
  • risk controls – adequate systems, processes, controls, human resources, and governance arrangements are to be maintained to:
    • ensure the integrity and security of customers’ DPTs (including having the movement of customers' assets controlled by senior managers and personnel who reside in Singapore); and
    • reduce the risk of loss of customers' DPTs (including requiring at least 90% of customers' DPT to be kept in cold wallets);
  • audit – independent audit to be carried out on the DPTSP's compliance with the segregation and custody requirements;
  • custodial function – no independent custodian is mandated but where the DPTSP itself provides the custody account, this function is to be operationally independent from other business units; and
  • disclosures – clear written disclosures to be provided to customers on the risks involved in having their assets held by the DPTSP.

To implement the above segregation and custody requirements, the MAS has launched a consultation proposing amendments to the Payment Services Regulations (PS Regulations), with this consultation closing on 3 August 2023. The MAS intends to effect the proposed amendments to the PS Regulations by October 2023. Notwithstanding the above, MAS expects DPTSPs to prepare to comply with the policy positions in relation to segregation and custody as set out in the July Response Paper by October 2023. MAS intends to publish Guidelines setting out further expectations on these requirements, nearer to the date of the publication of the final amendments to the PS Regulations. Given the tight timeline, DPTSPs should start reviewing their existing segregation and custody arrangements to ensure they are robust enough to satisfy MAS' new requirements. 

Lending and staking

In the July Response Paper, MAS acknowledged that its proposal to restrict DPTSPs from facilitating lending and staking of retail customers' assets was not met with broad support. Nevertheless, the regulator has "strong concerns" with DPTSPs playing a role in such activities, and is of the view that lending and staking of customers' assets continue to be a "source of significant consumer harm". MAS will therefore proceed to restrict DPTSPs from facilitating the lending and staking of retail customers' assets. There is no such restriction when dealing with non-retail customers. However, DPSTPs are to provide non-retail customers with a clear risk disclosure document and obtain their explicit consent prior to any lending or staking of these customers' assets.

Market integrity risks

The October 2022 consultation had also sought views on the broad regulatory approach on addressing market integrity risks in DPT services. In the July Response Paper, the MAS informed that most respondents agreed with the MAS' observations on good industry practices to address market integrity risks, and some respondents suggested the imposition of further measures to prevent market abuse and unfair trading practices. To address the suggestions, the MAS has launched a consultation proposing: (i) requirements for DPTSPs to address market integrity risks and (ii) prohibitions against unfair trading practices generally applicable to all market participants. This consultation closes on 3 August 2023 as well.

Amongst other things, MAS proposes to impose requirements for:

  • DPTSPs to maintain adequate systems, processes, controls, human resources, and governance arrangements, in a manner that is commensurate with the nature, scale and complexity of their business, to:
    • handle and execute customers’ orders in a fair, orderly, and timely manner; and
    • prevent and detect unfair trading practices; and
  • DPTSPs operating a trading platform to ensure that the operation of the DPT trading platform is fair, orderly, and transparent. This includes having clear rules on a number of matters, such as the correction or cancellation of error trades, and controls and corrective action to prevent, avoid or rectify potential disorderly trading conditions.

Regarding the fair, orderly, and timely handling and execution of customers’ orders, the MAS has proposed that:

  • policies and procedures for handling and executing customers’ orders should include the factors which the DPTSP takes into account and the considerations for determining the relative importance of the various factors;
  • DPTSPs do not receive any commission or other form of payment from other persons for routing customers’ orders to them;
  • DPTSPs handle and execute the orders in accordance with the time of receipt when comparable orders are received from different customers; and
  • DPTSPs maintain policies and procedures to correct or cancel error trades, including having pre-trade risk controls for electronic order systems.

Regarding the prevention and detection of unfair trading practices, the MAS has proposed that the DPTSPs:

  • conduct surveillance of orders and transactions on a real-time basis;
  • have fair and objective procedures to investigate any potentially unfair trading practices and take appropriate action, including referring potential non-compliance or breach to MAS for review;
  • maintain proper records with adequate details of all on-chain and off-chain orders (including cancellation of orders) and transactions for a period of five years;
  • maintain a controlled list of persons with access to the material non-public information on a need-to-know basis and information barriers to restrict access of material non-public information to this list of persons; and
  • maintain policies and procedures in relation to personal trading activities by its officers and employees, which should address pre-dealing and post-dealing procedures, periodic education, monitoring, and review, and restrictions.

As a first step, the MAS intends to issue Guidelines setting out its expectations for DPTSPs as regards market integrity risks. This is to be followed by a consultation on the detailed regulatory requirements and subsidiary legislation in due course.

Unfair trading practices

Regarding its proposed prohibitions against unfair trading practices, the MAS has proposed to introduce provisions for DPTs that are broadly similar to the provisions under the Securities and Futures Act 2001 on market misconduct, insider trading and liability. The proposed amendments to the Payment Services Act 2019 will be published for consultation in due course.


The MAS is clearly tightening its rules on the DPT industry in Singapore, which is a step forward in promoting better governance and improving the overall quality of the industry, in view of the spate of high-profile collapses in 2022. Given the timeline set by the MAS, DPTSPs in Singapore are urged to review the new rules and proposals with urgency, and be prepared to restructure parts of their operations or business in order to be compliant. 

This item first appeared on our RegTalk blog