Advancing Digital Asset Compliance & Market Integrity

DACOM Singapore

Solidus Labs’ DACOM has made its way to Asia with its debut in Singapore on February 15, 2023. This forum is renowned for its emphasis on digital asset compliance and aims to foster constructive dialogue between industry leaders and regulators to advance crypto market integrity.

At the event, sFOX’s Singapore Compliance Manager, Mike Seng, was in attendance to engage in thought-provoking discussions and gain insights into best practices from fellow market practitioners and regulatory authorities. This live event provided an excellent opportunity for networking and knowledge sharing.

Addressing key topics in crypto market integrity and consumer protection

The DACOM Singapore 2023 summit proved to be an engaging event with a discussion centered on crucial points.

The summit delved into how regulators are addressing crypto market integrity and consumer protection, re-establishing public trust as crypto’s strategic growth engine, and the evolving role of compliance and risk teams in the crypto industry.

Attendees had the opportunity to hear from esteemed industry players, including representatives from the U.S. Department of Treasury, Futures Industry Association, Binance, BitMEX, Crypto.com, and State Street Digital, who all actively engaged in the discussions. It was an excellent opportunity to exchange ideas and gain valuable insights from thought leaders in the industry.

Regulatory Frameworks Across the World

As the digital asset industry continues to grow, regulatory frameworks across the world are evolving to address the concerns of both regulators and consumers.

  • In the United States, the Treasury has noted deficiencies in consumer protection and is pushing for dedicated authority to regulate payment services at the federal level, rule-making authority for crypto spot markets, and a prudential regulatory framework for stablecoins.
  • New York Department of Financial Services (“DFS”) has also recently released the Virtual Currency Guidance which many believe will set the baseline standard for crypto custody businesses.
  • In the EU, the recent introduction of MiCA licensing and framework will set a regulatory standard for crypto-assets across Europe
  • In Asia, the regulatory approach to digital assets differs from country to country. Singapore regulates crypto as payments, Malaysia regulates crypto as securities, and Indonesia regulates crypto as commodities. In Hong Kong, the regulator is more concerned about consumer protection.

Regulatory Challenges and Developments

As digital assets become increasingly mainstream, regulators are struggling to fit them into traditional finance regulatory frameworks. The securities model, payment model, and commodities model do not quite fit digital assets, which have unique features and characteristics.

Regulators will need to establish more comprehensive risk-based prudential standards and capital liquidity requirements to address the inherent risks associated with digital assets. AML risks alone are not enough to cover the potential risks in this rapidly evolving industry.

Therefore, it is imperative for regulators to work closely with industry players to develop a robust regulatory framework that strikes a balance between consumer protection and innovation. By doing so, regulators can ensure the integrity of the digital asset market while supporting its growth and development.

Rebuilding Trust

Following the FTX collapse, there has been a growing trend toward seeking reliability and trustworthiness in centralized exchanges. As such, many customers are now questioning what sets you apart from others in the industry and why they should place their trust in centralized exchanges. What makes you different?

  • Having an explicit policy set out around how we protect client assets and having a very clear message to the customers when they ask is critical to customer trust and confidence.
  • To build trust, saying what policies have been put in place is not enough. The onus is on us to prove to them what has been done to protect them.
  • Regulations help institutional adoption. Institutional clients feel more comfortable moving into this space with licensed partners as they are more assured of sound controls established to safeguard their interests.

Strengthening Crypto Market Integrity

Enhancing market integrity was a key topic of discussion, with a focus on market surveillance. The purpose of market surveillance is to analyze unusual trade activities on the order book and detect any potential market misconduct or manipulation. For example, if the price of a crypto pair suddenly spikes by 80%, it is essential to determine whether this is a legitimate buy from a large investor or if bad actors are attempting to manipulate the market.
Crypto market surveillance is in its pioneering space where regulators are starting to explore its potential to protect customers from the unfair trading practices of nefarious actors.

In conclusion, the DACOM Singapore 2023 forum was a highly informative and engaging event that covered a range of topics impacting the digital asset industry. The event provided an excellent opportunity for market participants to learn, share insights and network with their peers. As the regulatory environment in Singapore and around the world continues to evolve, forums like DACOM are critical in helping market participants stay abreast of new developments and grow their businesses in a compliant manner. Overall, it was a fantastic in-person session, and we look forward to attending future events to continue promoting digital asset compliance and market integrity.