Singapore Expands its Investigation into Crypto Firms and Plans to Implement New Regulations

The Monetary Authority of Singapore (MAS) has directed that certain cryptocurrency firms submit data on their business activities. Following the failures of crypto-hedge funds Three Arrows Capital, Terraform Labs, and even Vauld, the Central Bank is expected to make changes to its current crypto regulation policies.

This change in cryptocurrency regulation will primarily aid in the resolution of the current liquidity crisis as well as withdrawal issues. According to reports, the Monetary Authority of Singapore (MAS), Singapore's central bank, has now sent a detailed questionnaire to some of the applicants and holders of the MAS' Digital Payment Token Licenses.

According to questionnaires sent to applicants in the previous month, it was asking for "highly granular information" about the business activity as well as holdings by investigated crypto firms. The top tokens owned by the company, as well as the top lending and borrowing counterparties, the amount loaned, and the top tokens staked through DeFi protocols were all included in the business-related data.

Evaluating the Financial Stability and Interconnection of a Crypto Firm

The Singapore Central Bank has stated that it intends to strengthen safeguards to protect retail customers. MAS has also sought public input on stablecoin regulation.

According to people familiar with the situation, MAS has stated that the firms are expected to respond to the given questionnaire as soon as possible. It has currently issued nearly ten licences to Singapore firms. Crypto.com and DBS Vickers, the brokerage arm of DBS Bank, are among the exchanges on the list. This is a small number when compared to the 200 firms that have applied for the license.

This shift in regulatory action in Singapore is primarily aimed at increasing scrutiny of digital asset firms in the midst of implementing new regulations. MAS's managing director has previously stated that the financial watchdog is developing a regulatory framework.

Over the next few months, this framework will help address consumer protection, market conduct, and reserve backing for stablecoins.

Regulations Required in the Following Fields

According to the central bank, certain areas of Singapore's existing crypto regulations require specific amendments. Risk-based capital and liquidity requirements apply to cryptocurrency payment service providers. This means that they are frequently required to protect customer funds or digital asset tokens from becoming insolvent.

However, for the time being, the majority of these regulations are concerned with anti-money laundering policies and terrorism financing. While these areas receive adequate attention, customer protection requires additional attention.

This new regulatory framework for cryptocurrency follows an ongoing liquidity crisis, as well as withdrawal issues in the midst of a crypto downturn.

Three Arrows Capital (3AC), a Singapore-based hedge fund, was recently declared bankrupt after failing to meet its margin calls in the middle of June of this year.