Singapore plans to tighten rules on crypto trading by retail investors

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Singapore plans to tighten rules on crypto trading by retail investors

Singapore plans to introduce new regulations that will tighten cryptocurrency trading by retail investors, according to one of the country’s top regulators. The measure is taken to safeguard investors’ interests, given that they remain “irrationally oblivious” to market risks.

Ravi Menon, Chief Executive of the Monetary Authority of Singapore (MAS), was speaking to a seminar titled “Yes to Digital Asset Innovation, No to Cryptocurrency Speculation” on Monday when he made the remarks.

Menon said that although the MAS has said it wants to attract cryptocurrency companies, it has a lengthy licensing process. This is where it takes strong action to restrict retail crypto investments.

“There is now greater momentum among global regulators to improve regulation in this space. MAS will also,” he added.

Increased control

Singapore is one of the leading countries in the world for cryptocurrency and blockchain businesses. Singaporean authorities have shown a strong will to develop the country as a leading fintech space.

China’s largest cryptocurrency exchange Huobi and major US exchange Gemini are two of the many cryptocurrency companies that have invested in the country.

In 2019, Singapore past the Payment Services Act to broaden the scope of financial regulation in the country. This, so that digital assets such as cryptocurrencies can also be regulated.

The MAS chief’s recent remarks are a continuation of Singapore’s policy to increasingly regulate the cryptocurrency industry. As the cryptocurrency market surged south in 2022 following the collapse of TerraUSD and Luna, its ripple effects were felt in Singapore. Singapore-based cryptocurrency hedge fund Three Arrows Capital went bankrupt due to the exposure of these alts.

The ensuing bloodbath did not spare other market players either. Cryptocurrency exchanges operating in Singapore such as Zipmex and Vauld also crashed during this period.

The MAS chief said cryptocurrencies serve no useful function outside of a blockchain except as a vehicle for speculation. The bank has repeatedly warned people about the risks associated with cryptocurrency investments.

The MAS seeks to put in place more measures to reduce harm to consumers. It plans to include client suitability tests and restrict the use of leverage and credit facilities for crypto-trading. Menon believes consumer interests can be protected through the coordinated approach of the central bank, industry and the international community.

He highlighted the need for digital asset activities to be authorized under the Payment Services Act. He also acknowledged that there is frustration among industry players over the licensing process. He added that the bank can see good potential in stablecoins, provided they are firmly backed by high-quality reserves and are well regulated.

Rigorous process in place

About 180 cryptocurrency companies applied in 2020 for a license at MAS, but the bank has so far accepted only a dozen proposals.

Customer interest, asset liquidity, and money laundering remain the primary concerns associated with the cryptocurrency industry. These have prompted regulators around the world to introduce tighter and tighter regulations.

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