The government of Singapore wants to ban retail from lending funds to crypto
- Unstable prices can cause consumers to incur large losses
- Stablecoins must be pegged to the Singapore dollar
The Singapore government has proposed a new set of regulations to protect consumers and keep an eye on how digital assets are used in the country.
The Monetary Authority of Singapore (MAS), the country’s central bank and financial regulator, recently published two consultation documents with recommendations to tighten the country’s regulatory stance on digital assets.
One of the proposals in the consultation paper is to make it illegal for retail investors to use credit cards or other credit facilities to borrow money to buy or trade cryptocurrencies.
MAS proposes a ban on crypto credit
MAS also suggested that crypto investors undergo a test where they are asked to fill out a questionnaire to see if they are aware of the risks associated with investing in cryptocurrencies.
However, high net worth investors who are eligible for a wider range of investments are exempt from these restrictions. Accredited investors could only invest S$200,000 (about $142,000) in digital assets, according to the paper.
MAS has taken the decision to ban cryptocurrency companies from offering leveraged transactions, loans, bets and other similar services due to the volatile nature of cryptocurrencies. The Central Bank claims that consumers may suffer significant losses as a result of price volatility.
Finanstilsynet also said crypto service providers should keep customers’ assets separate and use strong risk disclosures to stop complaints from customers.
According to the paper, the recent failure of several firms in the DPT industry underscores the importance of DPTSPs having effective and robust arrangements for the identification and segregation of clients’ assets.
Regulation of Stablecoins in Singapore In a separate consultation document, MAS announced its plans to regulate the issuance of stablecoins linked to a single currency (SCS) whose value exceeds S$5 million (US$3.6 million).
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Stablecoins regulation in Singapore
According to the paper, stablecoins must be fully backed by reserve funds of the same denomination and pegged to the Singapore dollar or a group of 10 currencies.
In addition, stablecoin issuers are required to publish a white paper detailing all important information, including holders’ redemption rights.
But the country’s central bank made it clear that it does not intend to ban cryptocurrency services for retail customers at this time to prevent them from using unlicensed platforms for such services.
The supervisory body wants to hear from stakeholders about the guidelines during the consultation period, which starts today and ends on 21 December.