Regulation
MAS Introduces New Crypto Regulations, Including Custody of Digital Assets – Ledger Insights
The Monetary Authority of Singapore (MAS) has introduced Cryptocurrency-related changes to the Payment Services Act, focusing on digital payment token (DPT) service providers. In addition to this, it has published guidelines for the custody of digital assets.
The law has been expanded to regulate three types of additional services:
- Custody of digital assets
- Payments or transfers involving tokens, even if the service provider comes into possession of the DPTs
- Cross-border payments, regardless of whether the funds are within Singapore.
The announcement includes transitional provisions for existing providers to obtain licensing. These suppliers must inform MAS within 30 days.
MAS has also provided detailed guidelines in this regard custody of digital assets following a consultation and a diagram of the pending rules last November.
Guide to the custody of digital assets
Under the new guidance, customer digital assets held in trust must be separated from the service provider’s assets, although it does not mandate 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 client assets. However, regulations are less stringent for smaller companies, where effectively two individuals might handle the control.
Many service providers opt for multi-party computation (MPC) wallets, which divide private keys into multiple parts. MAS considers it acceptable for transactions to proceed if at least two out of three actions are required for approval.
MAS has consistently expressed concern that cryptocurrencies are unsuitable investments for retail consumers. As a result, the guidelines require service providers to prevent retail customers from engaging in activities such as pledging, lending or staking their digital assets.
Other guidelines include managing conflicts of interest, disclosing information to clients and issuing monthly account statements. MAS established these rules after extensive consultation.