Cryptocurrency custodianship became very popular after the collapse of FTX and the circumstances surrounding its bankruptcy. Coindesk’s recent interview with the new CEO of OKX Singapore, Grace Lin, highlights this.
Grace Lin revealed that custodian arrangement was the most critical aspect of getting a Major Payment Institution (MPI) license in Singapore.
The CEO noted that most Singapore traders are long-term holders (HODLers) and value buy-and-hold over active trading, making custodianship essential.
Custodianship and OKX Singapore’s MPI License
The Monetary Authority of Singapore, the country’s financial regulator, gives out the Major Payment Institution (MPI) license. Every payment service provider in Singapore, including crypto exchanges, must obtain this license to operate legally.
However, obtaining the MPI license is no small feat for cryptocurrency exchanges as MAS has one of Asia’s most stringent crypto licensing regimes. This strict regulation came after FTX’s liquidity crunch due to user fund misappropriation.
In a recent interview, Grace Lin, the new CEO of OKX Singapore, discussed how the exchange obtained its recently acquired MPI license. Lin also discussed the challenges OKX faced before achieving this feat and what sets the Singapore crypto market apart.
The CEO explained that getting a custodial bank account was the core requirement OKX needed to meet to become a fully licensed exchange in Singapore.
According to Lin, fulfilling this condition was challenging because the banks needed to trust the exchange. Before agreeing to work with OKX, the banks had to evaluate the exchange’s valuation, integrity, plans, and compliant measures.
Further, Lin noted that fulfilling this condition was important to ward off OKX’s transition from an in-principle to a full MPI license. The need for crypto asset custodians cannot be overemphasized. The FTX collapse is a good example of this fact.
Japan FTX customers were safe from the exchange’s liquidity crunch thanks to rules enacted after the Mt. Gox and Coincheck hacks. These rules required crypto exchanges to use independent third-party custodians to safeguard customer funds.
In a recent interview, Mt. Gox’s former CEO, Mark Karpeles, said the crypto exchange wouldn’t have collapsed if modern tools like custodians were available.
What Makes the Singapore Market Unique?
Lin also highlighted why the Singapore market is Unique. She noted that OKX can use Singpass, the Singapore government’s digital identity system. This ID system streamlines the know-your-customer (KYC) process, which may take days or hours to complete in other jurisdictions.
Additionally, Lin revealed that Singapore traders are mostly passive, with a greater preference for buy-and-hold instead of actively trading their crypto assets. So, this preference puts third-party custodians in high demand as they help to hold and safeguard user assets.
Moreover, as Lin explained, not all tokens are listed on OKX because MAS must pre-vet each before adding them to the platform. The exchange must provide a legal opinion clarifying that the token is not a security.
In addition, OKX must conduct a risk assessment, do due diligence on the tokens intended for listing, and submit them to MAS.
OKX Singapore had 21 tokens on its platform, but Lin revealed that it has expanded to add over 50. The CEO also said the exchange has submitted more tokens to MAS, and once they are approved, they will be listed on the platform.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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