Singapore Proposes Crypto Rules to Strengthen Consumer Protection
Singapore’s regulators have stepped up warnings to retail investors about the “dangers” of speculating in cryptocurrencies and outlined proposals to keep consumers safe, following a series of high-profile crypto failures linked to the city-state.
In two consultation documents issued on Wednesday, the Monetary Authority of Singapore proposed to restrict retail investors from borrowing money or using credit cards to buy cryptocurrencies and from lending their digital tokens in search of returns. It also wants crypto exchanges to test potential crypto buyers to check they understand the risks in what it calls a “highly volatile” asset class.
Singapore has generally provided a welcoming environment for the crypto industry. Exchange Binance once described it as a “crypto paradise”, and several prominent firms have established themselves there. But regulators have sounded the alarm after a series of high-profile crypto implosions this year, proposing restrictions on some of the most popular speculative tools.
“MAS strongly discourages speculation in cryptocurrencies by consumers,” it said. “Several cases of misconduct have been reported by international media, including where legal proceedings were initiated against entities that did not have sufficiently robust business conduct practices in place,” it added.
This year, Singapore-based crypto hedge fund Three Arrows Capital collapsed, taking down the Voyager Digital exchange with it. An international hunt is also underway, focusing on the city-state, to track down Terraform Labs co-founder Do Kwon, whose stablecoin terraUSD imploded in May.
MAS has stopped short of an outright crypto ban, saying it welcomes the “transformative economic potential” of the asset class. But trading platforms must ensure that retail clients were fully aware of risks and had the financial resources to withstand large losses, it said. “Support for a digital asset ecosystem does not mean support for cryptocurrency speculation,” it noted.
MAS also said that so-called stablecoins, which are designed to track the value of real assets such as the dollar in tokenized form, must be properly backed with reserve funds tied to the Singapore dollar or other major currencies.
Nizam Ismail, founder of Singapore-based Ethikom Consultancy, told the Financial Times that some proposals “may be overly prescriptive and run counter to Singapore’s regulatory philosophy”.
“The ban on the purchase of [tokens] by credit card or credit may unwittingly encourage retail investors to trade in crypto derivatives, which are largely unregulated,” Ismail added.
Broader proposals include forcing service providers to ensure customer funds are segregated from their own assets and adopting “good industry practice” against unfair trading, including monitoring trading activity and setting rules for trading.
“Markets for digital payment tokens have been subject to unfair trading practices of market manipulation, deceptive conduct and insider trading by malicious actors,” MAS said.
Singapore is likely to face the same issues as other jurisdictions in terms of monitoring and controlling trading by its citizens on platforms domiciled abroad or operating outside of regulatory oversight. “The problem of unregulated entities operating in this area of Singapore has not been accounted for,” said Kelvin Low, a law professor at the National University of Singapore.
The supervisory authority’s proposals are open for public consultation until 21 December.
