South Pacific Countries Announce Ban On Crypto Lending

By Vince • July 5, 2023 1:51 pm • Comments

Following the collapse of crypto firms such as BlockFi and Celsius in 2022, many regulatory bodies began to look at crypto lending services with extreme suspicion.

Lawsuits from the U.S. Securities and Exchange Commission, regulatory action across Europe, and investigations across the world are placing increased pressure on crypto exchanges, centralized service providers, and firms.

The South Pacific region is no different, and now regulators in Asian countries are beginning to clamp down on certain crypto services.

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According to a recent announcement from the Monetary Authority of Singapore (MAS), crypto lending and staking services will no longer be available to retail customers.

Regulators in Thailand followed suit and announced a similar ban following the announcement from MAS.

Multiple outlets and crypto influencers confirmed:

The MAS announced on Monday:

“The Monetary Authority of Singapore (MAS) today announced new requirements for Digital Payment Token (DPT) service providers to safekeep customer assets under a statutory trust before the end of the year. This will mitigate the risk of loss or misuse of customersā€™ assets, and facilitate the recovery of customersā€™ assets in the event of a DPT service providerā€™s insolvency. MAS will also restrict DPT service providers from facilitating lending and staking of DPT tokens by their retail customers.

2 These measures are introduced following an October 2022 [1] public consultation on regulatory measures to enhance investor protection and market integrity in DPT services. The consultation received significant interest from a wide range of respondents, with broad support for DPT service providers to:

segregate customersā€™ assets from its own assets and held in trust; safeguard customersā€™ moneys;
conduct daily reconciliation of customersā€™ assets and keep proper books and records; maintain access and operational controls to customersā€™ DPTs in Singapore; ensure that the custody function is operationally independent from other business units; and provide clear disclosures to customers on the risks involved in having their assets held by the DPT service provider.

3 MAS is now seeking public feedback on the draft legislative amendments to the Payment Services Regulations here to put these requirements into effect. MAS will also publish guidelines in due course to support consistent implementation by the industry.

4 MAS will proceed with the proposal to restrict DPT service providers from facilitating lending or staking of their retail customersā€™ DPTs, as these activities are generally not suitable for retail public. DPT service providers may continue to facilitate such activities for their institutional and accredited investors. There were diverse views received on this proposal. Some respondents suggested to allow DPT service providers to offer these activities with the retail customerā€™s consent and risk disclosures, while others advocated a ban on these high risk and speculative activities. MAS will monitor market developments and consumer risk awareness as these evolve, and will take steps to ensure that our measures remain balanced and appropriate.

5 MAS had also consulted on the broad regulatory approach on market integrity in the October 2022 public consultation. Most respondents agreed with MASā€™ observations on good industry practices to address market integrity risks, and some respondents suggested that MAS should impose further measures to prevent market abuse and unfair trading practices. To follow up more specifically, MAS is issuing today a separate consultation paper proposing requirements for DPT service providers to address unfair trading practices. It will also set out legislative provisions and the types of wrongful conduct that constitute offenses.

6 MAS reminds the public that regulations alone cannot protect consumers from all losses, given the extremely high risk and speculative nature of DPT trading. Consumers must continue to exercise utmost caution when trading in DPTs as they may lose their assets. While the segregation and custody requirements will minimize the risk of loss of customersā€™ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers. Consumers must also remain vigilant and not deal with unregulated entities, including those based overseas, as they risk losing all their assets.

Stephane De Baets explained that this may hollow out profit for operators: “Singapore and Thailand ban lending and staking. Once you take out the leverage there will be no volume and no profit for operators. Crypto Swan song.”

 

Coin Telegraph had more on the new restrictions in Thailand:

The Thai SEC has banned crypto lending services, thus prohibiting crypto platforms from offering any form of return on deposited crypto by customers.

The SECā€™s aim is to increase protection for investors from the risks of lending services. The new regulations are set to come into effect from July 31, 2023.

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