Singapore Plans for Tougher Rules for Retail Crypto Trading, Probes Crypto Firms
Singapore is planning to roll out new regulations which will probably make it even more difficult for retail investors to trade digital assets. In an event on Monday, August 29, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said that retail investors seem to be “irrationally oblivious” to the risks of crypto trading.
The central bank chief added that despite regular warnings and measures, retail investors continue to increasingly trade in digital assets. In the seminar titled "Yes to digital asset innovation, No to cryptocurrency speculation”, Menon said: "They seem to be irrationally oblivious about the risks of cryptocurrency trading. Adding frictions on retail access to cryptocurrencies was an area the MAS was contemplating. These may include customer suitability tests and restricting the use of leverage and credit facilities for cryptocurrency trading”.
The latest development comes as there have been multiple defaults and bankruptcies during the crypto market crash of 2022. The biggest case has been that of bankrupt crypto hedge fund Three Arrows Capital (3AC) which led to a massive erosion of investors money’s it failed to meet margin calls during the crypto market crash.
Citing these episodes, regulators in Singapore have been initiating measures for greater consumer protection. Last week, Singapore’s central bank - Monetary Authority of Singapore (MAS) - started working on new regulations to address the ongoing liquidity and withdrawal crisis in the crypto space.
As per the Bloomberg report, the central bank sent detailed questionnaires to the applicants and holders of the MAS’ Digital Payment Token licenses. This exercise seeks to “highly granular information” about crypto business activity and holdings.
The checks will also focus on firms’ financial stability and interconnection with questions that include top lending and borrowing counterparties, the amount top tokens owned, and top tokens staked via decentralized finance protocols.
MAS chief Ravi Menon said that over the next few months, the central bank will work on regulatory framework in order to address “consumer protection, market conduct, and reserve backing for stablecoins”.
The MAS has cited some of the blind spots in the existing crypto regulations. It noted that crypto payment service providers aren’t subjected to liquidity requirements or risk-based capital. Also, they are not required to safeguard customers’ digital assets and funds from insolvency risks. Instead, the greater focus is on money laundering, technology risks, and terror financing risks.