In a bid to strengthen the regulatory framework for digital assets, the Monetary Authority of Singapore (MAS) has mandated that cryptocurrency platforms must hold client funds in trust by the end of this year.
The move comes as a response to the collapse of FTX, which highlighted the need for safeguarding customer assets. Additionally, MAS is progressing with a proposal to ban lending and staking by retail investors.
The MAS initiated consultations on these measures in October of the previous year, just before the FTX implosion. By requiring cryptocurrency exchanges to maintain customer assets in trusts, Singapore aims to ensure the protection of funds and enhance investor confidence.
While Singapore takes steps to tighten regulations, other jurisdictions like Hong Kong are actively seeking to attract greater participation in the digital asset sector.
The MAS emphasized that regulations alone cannot shield consumers from potential losses, especially considering the highly speculative nature of digital payment token trading.
The authority urged caution and vigilance on the part of traders, reminding them of the inherent risks associated with this market.
U.K. Law Commission Recommends ‘Distinct’ Category For Crypto Assets
In a separate development, the United Kingdom’s Law Commission has recommended the creation of a distinct category of personal property to accommodate and safeguard the unique features of cryptocurrencies and digital assets.
This recommendation follows a request from the British government for an analysis of legal frameworks that can effectively incorporate digital assets.
The proposed category of personal property would provide a nuanced approach to recognizing various digital assets, including cryptocurrencies and digitized instruments like carbon emission credits or export quotas.
By refraining from establishing strict boundaries for the category, the Commission seeks to allow common law in the U.K. to determine which assets fall within its scope.
The Law Commission also proposed the formation of an industry-specific panel consisting of technical experts, legal practitioners, academics, and judges. This panel would offer non-binding advice to courts on legal issues pertaining to the cryptocurrency sector.
Furthermore, the Commission recommended the establishment of a bespoke legal framework to facilitate the operation and enforcement of collateral arrangements.
Statutory law reforms were also suggested to clarify the classification of specific digital assets under the U.K.’s Financial Collateral Arrangements Regulations of 2003.
Following the Ministry of Justice’s request, the Law Commission commenced a review of international legal challenges relating to the cryptocurrency sector in October 2022.
In response to concerns over the criminal exploitation of cryptocurrencies, the U.K. Treasury and Home Office announced plans in March 2023 to regulate the sector robustly.
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