Crypto Frontline

Singapore – MAS, or the Monetary Authority of Singapore, will introduce schemes to better control the cryptocurrency industry after the bankruptcy of Three Arrows Capital or 3AC, a digital asset hedge fund in Singapore.

Singapore’s Central Bank issued two conference papers on plans to regulate the DPTSP or Digital Payment Token Service Providers’ operations, along with issuers of stablecoin under the Payment Service Act. 

Both papers targets to lessen the risk to customers from cryptocurrency trading and enhance standards of transactions related to stablecoin. The first paper includes suggestions for DPT or Digital Payment Token services related to big digital assets like Ether, XRP, or Bitcoin. 

As per the authority, any form of leverage or credit in exchanging DPTs would amplify losses, potentially leading to larger losses than an investment of the customer. 

MAS proposes prohibiting DPTSPs from giving retail customers credit facilities in cryptocurrency or fiat currencies. As per the regulator, digital asset service providers should not accept deposits from credit cards if customers need crypto services. 

The Central Bank stated that MAS intends that DPTSPs assure that the assets of customers are not part of the assets of DPTSP, and the customer should benefit from it. This statement referred to the previous failure of some crypto firms, including 3AC, in June. 

MAS also recommended that DPTSP adopt customer tests to evaluate retail customers’ knowledge regarding risk with cryptocurrency’s involvement. 

The second part of the paper states proposals to regulate the method for stablecoins, giving a set of operational and business requirements for stablecoin issuers. 

MAS proposed to limit stablecoin issuers from staking or lending SCS or Single-currency Pegged Stablecoins, along with other digital assets. 

As per the consultation, the proposal is to mitigate risks and ring the fence to the SCS issuer. Other entities will perform these activities. 

The regulator proposed to offer $1 million as a minimum base capital or an annual operating expense of 50%. This capital should include liquid assets. There’s an invitation to interested parties from the regulator, where these parties should submit their feedback on the proposal before December 21, 2022. 

According to the report, the cryptocurrency winter became harmful for digital asset lenders as many crypto firms could not pay out their commitments because of the big market drop. Some Bitcoin experts shared their confidence in cryptocurrency lending, which can still survive the bear market. However, they have to fix the issues involving short-term liabilities and assets.