Digital tokens and customer protections

23 October 2023

The global regulatory environment governing the sale, purchase, exchange, transfer, and custody of cryptocurrencies is changing. The nature of this regulation, by the competent authorities in a given jurisdiction, and the requirements with which entities subject to it must comply, depends primarily upon the characterisation of such assets, and the risks arising out of providing such services. In the specific context of cryptocurrencies, along with risks related to money-laundering and terrorism-financing, the proliferation of trading and speculation in relation to cryptocurrencies over the world has given rise to customer protection concerns, the need to guard against risks arising out of the insolvencies of cryptocurrency service providers, and to prevent market abuse and unfair dealing in relation to cryptocurrencies.

In May 2023, the International Organization of Securities Commissions released its Policy Recommendations for Crypto and Digital Asset Markets Consultation Report (CR01/2023), where it is stated that regulatory frameworks for virtual assets should seek to achieve regulatory outcomes for investor protection and market integrity that are the same as, or consistent with, those required in traditional financial markets. In line with these global developments, the Monetary Authority of Singapore (“MAS”) has been in the process of, among other things, consulting on proposed regulatory measures addressing customer protection and market integrity.

This article first explores the developments in Singapore on the general regulation of “cryptocurrencies” - generally known under Singapore law as “digital payment tokens” (“DPT”) - including recent proposals by MAS relating to customer protection requirements and the integrity of the DPT market. This article then delves deeper into MAS’ proposals in relation to the stablecoin regulatory framework in Singapore, and the operation of the Financial Services and Markets Act 2022.

Click here to read more.