My Strategies for MAS’s Proposed DTSPs Framework

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My Strategies for MAS’s Proposed DTSPs Framework


Singapore has persistently positioned itself as a
forward-thinking jurisdiction, balancing innovation with strong regulatory
oversight. As a fellow Singaporean, I’m very happy with its future planning.

The Financial Authority of Singapore (MAS) is looking for submissions for the Session Paper on the proposed regulatory strategy for
Digital Token Service Suppliers (DTSPs) underneath the Monetary Providers and
Markets Act 2022.

As an alternative of replying to the submission straight, I’ll
attempt to share my standpoint overtly right here, providing insights, potential plans,
and timelines for implementation. Earlier than I begin, I’m sharing this in my
private capability: I don’t symbolize any self-claimed digital belongings knowledgeable
teams, associations, or colleges.

License Software and Charge
Constructions

Within the first half of 2024, Singapore’s fintech market
noticed its cryptocurrency and blockchain sectors obtain US$211.90 million throughout
72 offers, marking a 22% enhance from US$166.30 million over 38 offers in
the second half of 2023.

Singapore has been actively engaged on strengthening
danger administration frameworks for digital asset tokenization and has not too long ago
launched an initiative to increase asset tokenization inside monetary companies.

The proposed license utility processes and price
constructions are essential components that can form the DTSP panorama in
Singapore. From my perspective, MAS ought to think about implementing a tiered
strategy to each timelines and costs, reflecting the variety of DTSPs in phrases
of dimension, complexity, and danger profile.

For timelines, I suggest a three-tier system:

Quick-track
(60 days): For small, low-risk DTSPs with simple enterprise fashions.

Normal
(90 days): For medium-sized DTSPs or these with reasonably advanced operations.

Prolonged
(120+ days): For big, advanced DTSPs or these proposing novel enterprise fashions.

This tiered strategy would permit MAS to allocate
assets effectively whereas guaranteeing thorough vetting of extra advanced
purposes. The price constructions can comply with the same tiered system based mostly on
the DTSP’s annual income or transaction quantity may very well be applied.

Minimal Monetary Necessities

The proposed minimal monetary necessities are a
crucial safeguard in opposition to potential market disruptions and client losses.
Primarily based on my evaluation, I imagine a risk-based strategy to setting these
necessities is extra possible. This might contain:

Base
Capital Requirement: A minimal base capital for all DTSPs, no matter dimension
or companies supplied.

Danger-Weighted
Capital Requirement: Extra capital necessities based mostly on the DTSP’s sorts of companies supplied, transaction volumes, and danger profile.

Liquidity
Requirement: A minimal liquidity ratio to make sure DTSPs can meet short-term
obligations.

Particularly, suppliers with capital
ratios above 15% have been 30% much less prone to face operational disruptions throughout
intervals of utmost market stress. I suggest that MAS think about setting the bottom
capital requirement at SGD 250,000, with extra risk-weighted necessities
that would enhance this quantity as much as SGD 5 million for the biggest and most
advanced DTSPs.

Audit
Necessities

The proposed duties of CEOs, administrators, and companions,
together with audit necessities, are elementary to making sure good governance and
accountability within the DTSP sector. The next enhancement is beneficial for
consideration:

Necessary
Coaching: Annual coaching applications for CEOs and administrators on regulatory
compliance, danger administration, and rising tendencies in digital belongings.

Danger
Committee: DTSPs above a sure dimension should set up a devoted
danger committee on the board stage.

Unbiased
Administrators: Mandating a minimal variety of unbiased administrators based mostly on the
DTSP’s dimension and complexity.

Audit
Frequency: Annual exterior audits for all DTSPs, with extra quarterly
inside audits for bigger suppliers.

Regulators are more and more leveraging technological options to
improve their supervisory features and handle huge quantities of information.
Consequently, corporations should interact extra regularly with regulators relating to
fintech and regtech developments.

Fintech corporations that implement strong governance
constructions and conduct common audits are certainly much less prone to expertise
compliance breaches.

AML/CFT Measures

The measures proposed in components 5–8 of the session
paper, significantly these associated to Anti-Cash Laundering (AML) and Countering
the Financing of Terrorism (CFT), are essential for sustaining the integrity of
Singapore’s monetary system. I suggest the next enhancements:

Danger-Primarily based
Method: Implement a tiered KYC/AML strategy based mostly on transaction volumes and
danger profiles.

Know-how
Integration: Encourage using AI and machine studying for transaction
monitoring and suspicious exercise detection.

Regulatory
Know-how (RegTech) Sandbox: Set up a sandbox surroundings for DTSPs to check
modern compliance options.

For present prospects onboarded previous to licensing, I
recommend a phased strategy:

Section 1
(0–6 months): Danger evaluation of present buyer base

Section 2
(6–12 months): Enhanced due diligence for high-risk prospects

Section 3
(12–18 months): Full compliance with new necessities for all prospects

Correspondent Account Providers

The proposed necessities for Correspondent Account
Providers and knowledge sharing for legislation enforcement functions are important
elements of a complete regulatory framework. Maybe the next
would assist:

Standardized
Knowledge Format: Develop a standardized knowledge format for data sharing throughout
the trade.

Blockchain
Analytics: Encourage using blockchain analytics instruments to boost
transaction traceability.

Safe
Info Sharing Platform: Set up a safe, centralized platform for
data sharing between DTSPs and legislation enforcement businesses.

Blockchain analytics instruments have been instrumental in
recovering stolen or illicitly obtained digital belongings worldwide. They permit legislation
enforcement businesses to hint and determine suspicious cryptocurrency
transactions on the blockchain , resulting in asset restoration efforts.

Know-how Danger Administration

The draft notices FSM-N28 to FSM-N33 cowl crucial
elements of DTSP operations, together with expertise danger administration, cyber
hygiene, and conduct. Primarily based on my observations, I suggest the next:

Steady
Monitoring: Implement real-time monitoring techniques for cyber threats and
operational dangers.

Incident
Response Drills: Mandate common incident response drills and simulations.

Third-Social gathering
Danger Administration: Set up clear tips for managing dangers related to
third-party service suppliers.

Client
Schooling: Require DTSPs to allocate assets for ongoing client training
initiatives.

Concerning working hours, maybe MAS can think about a
versatile strategy that permits for twenty-four/7 operations whereas guaranteeing satisfactory danger
administration and buyer help. This might contain:

Core
working hours (e.g., 9 AM to five PM SGT) with full help companies

Prolonged
hours with automated techniques and on-call help

Scheduled
upkeep home windows throughout low-volume intervals

Timeline for Implementation:

To make sure a easy transition to the brand new regulatory
framework, I suggest the next timeline:

Month
0–3: Publication of ultimate laws and tips

Month
3–6: Trade session and suggestions interval

Month
6–9: Finalization of technical specs and reporting codecs

Month
9–12: DTSP preparation and system upgrades

Month
12–18: Phased implementation of recent necessities

Month
18–24: Full compliance deadline for all DTSPs

This timeline permits for a gradual implementation,
giving DTSPs ample time to adapt their techniques and processes whereas
guaranteeing that the regulatory framework is absolutely operational inside two years.

With cautious implementation and steady refinement,
this regulatory framework has the potential to cement Singapore’s place as a
world chief in digital asset regulation, attracting modern companies
whereas safeguarding the pursuits of shoppers and the broader monetary system.

Singapore has persistently positioned itself as a
forward-thinking jurisdiction, balancing innovation with strong regulatory
oversight. As a fellow Singaporean, I’m very happy with its future planning.

The Financial Authority of Singapore (MAS) is looking for submissions for the Session Paper on the proposed regulatory strategy for
Digital Token Service Suppliers (DTSPs) underneath the Monetary Providers and
Markets Act 2022.

As an alternative of replying to the submission straight, I’ll
attempt to share my standpoint overtly right here, providing insights, potential plans,
and timelines for implementation. Earlier than I begin, I’m sharing this in my
private capability: I don’t symbolize any self-claimed digital belongings knowledgeable
teams, associations, or colleges.

License Software and Charge
Constructions

Within the first half of 2024, Singapore’s fintech market
noticed its cryptocurrency and blockchain sectors obtain US$211.90 million throughout
72 offers, marking a 22% enhance from US$166.30 million over 38 offers in
the second half of 2023.

Singapore has been actively engaged on strengthening
danger administration frameworks for digital asset tokenization and has not too long ago
launched an initiative to increase asset tokenization inside monetary companies.

The proposed license utility processes and price
constructions are essential components that can form the DTSP panorama in
Singapore. From my perspective, MAS ought to think about implementing a tiered
strategy to each timelines and costs, reflecting the variety of DTSPs in phrases
of dimension, complexity, and danger profile.

For timelines, I suggest a three-tier system:

Quick-track
(60 days): For small, low-risk DTSPs with simple enterprise fashions.

Normal
(90 days): For medium-sized DTSPs or these with reasonably advanced operations.

Prolonged
(120+ days): For big, advanced DTSPs or these proposing novel enterprise fashions.

This tiered strategy would permit MAS to allocate
assets effectively whereas guaranteeing thorough vetting of extra advanced
purposes. The price constructions can comply with the same tiered system based mostly on
the DTSP’s annual income or transaction quantity may very well be applied.

Minimal Monetary Necessities

The proposed minimal monetary necessities are a
crucial safeguard in opposition to potential market disruptions and client losses.
Primarily based on my evaluation, I imagine a risk-based strategy to setting these
necessities is extra possible. This might contain:

Base
Capital Requirement: A minimal base capital for all DTSPs, no matter dimension
or companies supplied.

Danger-Weighted
Capital Requirement: Extra capital necessities based mostly on the DTSP’s sorts of companies supplied, transaction volumes, and danger profile.

Liquidity
Requirement: A minimal liquidity ratio to make sure DTSPs can meet short-term
obligations.

Particularly, suppliers with capital
ratios above 15% have been 30% much less prone to face operational disruptions throughout
intervals of utmost market stress. I suggest that MAS think about setting the bottom
capital requirement at SGD 250,000, with extra risk-weighted necessities
that would enhance this quantity as much as SGD 5 million for the biggest and most
advanced DTSPs.

Audit
Necessities

The proposed duties of CEOs, administrators, and companions,
together with audit necessities, are elementary to making sure good governance and
accountability within the DTSP sector. The next enhancement is beneficial for
consideration:

Necessary
Coaching: Annual coaching applications for CEOs and administrators on regulatory
compliance, danger administration, and rising tendencies in digital belongings.

Danger
Committee: DTSPs above a sure dimension should set up a devoted
danger committee on the board stage.

Unbiased
Administrators: Mandating a minimal variety of unbiased administrators based mostly on the
DTSP’s dimension and complexity.

Audit
Frequency: Annual exterior audits for all DTSPs, with extra quarterly
inside audits for bigger suppliers.

Regulators are more and more leveraging technological options to
improve their supervisory features and handle huge quantities of information.
Consequently, corporations should interact extra regularly with regulators relating to
fintech and regtech developments.

Fintech corporations that implement strong governance
constructions and conduct common audits are certainly much less prone to expertise
compliance breaches.

AML/CFT Measures

The measures proposed in components 5–8 of the session
paper, significantly these associated to Anti-Cash Laundering (AML) and Countering
the Financing of Terrorism (CFT), are essential for sustaining the integrity of
Singapore’s monetary system. I suggest the next enhancements:

Danger-Primarily based
Method: Implement a tiered KYC/AML strategy based mostly on transaction volumes and
danger profiles.

Know-how
Integration: Encourage using AI and machine studying for transaction
monitoring and suspicious exercise detection.

Regulatory
Know-how (RegTech) Sandbox: Set up a sandbox surroundings for DTSPs to check
modern compliance options.

For present prospects onboarded previous to licensing, I
recommend a phased strategy:

Section 1
(0–6 months): Danger evaluation of present buyer base

Section 2
(6–12 months): Enhanced due diligence for high-risk prospects

Section 3
(12–18 months): Full compliance with new necessities for all prospects

Correspondent Account Providers

The proposed necessities for Correspondent Account
Providers and knowledge sharing for legislation enforcement functions are important
elements of a complete regulatory framework. Maybe the next
would assist:

Standardized
Knowledge Format: Develop a standardized knowledge format for data sharing throughout
the trade.

Blockchain
Analytics: Encourage using blockchain analytics instruments to boost
transaction traceability.

Safe
Info Sharing Platform: Set up a safe, centralized platform for
data sharing between DTSPs and legislation enforcement businesses.

Blockchain analytics instruments have been instrumental in
recovering stolen or illicitly obtained digital belongings worldwide. They permit legislation
enforcement businesses to hint and determine suspicious cryptocurrency
transactions on the blockchain , resulting in asset restoration efforts.

Know-how Danger Administration

The draft notices FSM-N28 to FSM-N33 cowl crucial
elements of DTSP operations, together with expertise danger administration, cyber
hygiene, and conduct. Primarily based on my observations, I suggest the next:

Steady
Monitoring: Implement real-time monitoring techniques for cyber threats and
operational dangers.

Incident
Response Drills: Mandate common incident response drills and simulations.

Third-Social gathering
Danger Administration: Set up clear tips for managing dangers related to
third-party service suppliers.

Client
Schooling: Require DTSPs to allocate assets for ongoing client training
initiatives.

Concerning working hours, maybe MAS can think about a
versatile strategy that permits for twenty-four/7 operations whereas guaranteeing satisfactory danger
administration and buyer help. This might contain:

Core
working hours (e.g., 9 AM to five PM SGT) with full help companies

Prolonged
hours with automated techniques and on-call help

Scheduled
upkeep home windows throughout low-volume intervals

Timeline for Implementation:

To make sure a easy transition to the brand new regulatory
framework, I suggest the next timeline:

Month
0–3: Publication of ultimate laws and tips

Month
3–6: Trade session and suggestions interval

Month
6–9: Finalization of technical specs and reporting codecs

Month
9–12: DTSP preparation and system upgrades

Month
12–18: Phased implementation of recent necessities

Month
18–24: Full compliance deadline for all DTSPs

This timeline permits for a gradual implementation,
giving DTSPs ample time to adapt their techniques and processes whereas
guaranteeing that the regulatory framework is absolutely operational inside two years.

With cautious implementation and steady refinement,
this regulatory framework has the potential to cement Singapore’s place as a
world chief in digital asset regulation, attracting modern companies
whereas safeguarding the pursuits of shoppers and the broader monetary system.



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