Singapore is mulling over additional rules in cryptocurrency trading that it believes are necessary to protect the general public. These may include restrictions on retail and the use of leverage in cryptocurrency transactions.
The disclosure comes weeks after repeated government warnings that cryptocurrencies, due to their “sharp speculative price swings”, are unsuitable retail investments for the public.
Recent market events have clearly highlighted the risks with prices of several cryptocurrencies falling significantly, said Tharman Shanmugaratnam, Senior Minister and Minister in charge of the Monetary Authority of Singapore (MAS). In a written response Monday to a parliamentary question, he said MAS had been issued warnings on cryptocurrency investments.
Tharman noted that the industry regulator had already taken steps beyond most others, Tharman told MAS in January restricted the marketing and advertising of cryptocurrency services in public areas and blocked the display of cryptocurrency trading as trivial.
He added that digital payment token providers had since adhered to the rules, which included removing both cryptocurrency ATMs and advertisements from public areas and public transit locations.
Under the country’s Payment Services Act, MAS was empowered to take further measures to ensure better consumer protection, maintain financial stability and ensure the effectiveness of its monetary policy, the minister said.
Tharman said: “MAS has carefully considered introducing additional consumer protection safeguards. These may include setting limits on retail participation and rules on the use of leverage in transactions in cryptocurrencies. Given the borderless nature of cryptocurrency markets, however, there is a need for regulatory coordination and cooperation worldwide. These issues are discussed at various international standardization bodies in which MAS actively participates.”
The European Union reached a preliminary agreement on cryptocurrency regulations which aimed to “protect investors and preserve financial stability”. Coined Markets in Crypto Assets (MICA), the regulatory framework would cover issuers of unbacked crypto assets and stablecoins, trading platforms and wallets in which crypto assets were held.
For example, the new rules require cryptocurrency service providers to set “strict requirements” to protect consumers’ wallets and would be held liable when investors’ assets are lost.
French Minister of Economy, Finance and Industrial and Digital Sovereignty, Bruno Le Maire, said: “Recent developments in this rapidly evolving sector have confirmed the urgent need for an EU-wide regulation. MICA will better protect Europeans who have invested in these assets and prevent misuse of crypto assets, while being innovation-friendly to maintain the attractiveness of the EU.”
MICA still needs to be approved by the Council and the European Parliament before going through the formal approval procedures.
However, Singapore had emphasized the importance of encouraging the development of underlying technologies often associated with cryptocurrencies, especially blockchain.
Deputy Prime Minister and Coordinating Minister for Economic Policy, Heng Swee Keat, said last month efforts were needed to bring out the best potential of emerging technologies while mitigating risks.
He said, for example, that a consortium has been set up to ensure that the responsible use of artificial intelligence (AI) in the financial sector and this led to the release of white papers and toolkits to guide the industry.
The same approach should be applied to drive the benefits of Web 3.0 developments while minimizing the drawbacks, Heng said, pointing to distributed ledgers and tokenization, which brought transparency and cost savings.
“Crypto-assets have been in the spotlight recently for all the wrong reasons. However, this doesn’t reflect where the greatest value of blockchain and digital assets lies, much of which is away from the retail brilliance,” he said.
He noted that while cryptocurrencies were unsuitable as retail investments due to their volatile prices, the underlying blockchain technology had the potential to streamline and improve cross-border wholesale transactions†
MAS announced plans in May to test asset tokenization use cases and assess the feasibility of autonomous trading based on blockchain technology. Efforts here include developing interoperable networks to facilitate trading of digital assets, as well as reviewing the regulation needed to protect against potential risks.
According to a survey published last August, 67% of personal Singapore investors held cryptocurrencies with 78% owning Ethereum and 69% owning Bitcoin.
Investments in Singapore’s fintech sector also grew 47% year-on-year to $3.94 billion last year, with blockchain and cryptocurrencies bring in almost half the money at $1.48 billion spread over 82 deals, according to KPMG.