MAS Consultation Paper on Proposed Regulatory Measures for Digital Payment Token Services

The MAS (Monetary Authority of Singapore) has issued a consultation paper on the proposed new requirements for DPTSP (Digital Payment Token Service Providers). The additional requirements relate to:

• Consumer access
• Business conduct
• Managing technology and cyber risks
• Market integrity

Following the consultation and considering responses received, the MAS will issue Guidelines setting out expectations for DPTSP in the above-mentioned areas. The Guidelines will be subsequently followed by regulatory requirements and relevant legislation.

MAS is considering a transition period of 6-9 months for DPTSPs to meet the guidelines.

High-level summary of proposed requirements in each category:

_{Consumer Access}

Consumer access measures are proposed for retail investors who are residents of Singapore or incorporated in Singapore.

According to the current framework of consumer classification in Singapore, there are 3 categories of investors: accredited investors (AI), institutional investors and retail investors. One of the criteria for grouping is the consumer’s net personal assets. The MAS is considering whether and (if yes) how to treat DTP holdings in determining the consumer’s net personal assets. Additionally, the MAS is proposing that the assessment of the consumer classification should be refreshed on an ongoing basis.

The access measures for retail investors would entail:

• Assessing the investors’ knowledge of the risks of DTP services, such as volatility, risks of loss, cyber risks etc
• Not offering monetary or non-monetary incentives
• Restrictions on borrowing to purchase DTPs and the use of leveraged products

_{Business Conduct}

The proposed business conduct requirements focus on:

• Ensuring the customers’ assets are held separately from DPTSP assets
• Providing written disclosure to customers
• Having appropriate measures to safeguard private keys and regarding storage of customers’ funds

_{Managing Technology and Cyber Risks}

DPTSPs are already required to comply with:

• MAS Notice on Cyber Hygiene
• MAS Technology Risk Management Guidance

MAS is now proposing that the requirements of the Notice of Technology Risk Management (that are currently applicable to financial institutions) apply also to DPTSPs.

_{Market Integrity}

MAS ‘encourages’ DTP trading platform operators to put in place safeguards against unfair trading practices such as  for example:

• Insider trading
• Trade spoofing
• Wash trading
• Pump and dump
• Cornering

(All of the above points are explained briefly in the proposal)

The proposal outlines examples of good practices in this regard, namely:

• Putting in place effective systems, procedures and arrangements to promote fair, orderly, and transparent trading of DPTs traded on the trading platform
• Monitoring trading activities that take place on DPT trading platforms, such as employing real-time surveillance systems