Summary:
- The Monetary Authority of Singapore (MAS) published two consultation papers with proposed cryptocurrency regulations geared toward mitigating trading risks and providing efficient oversight for locally issued stablecoins.
- Singapore’s central bank wants the public to provide feedback on the measures.
- Wednesday’s announcement comes as the latest effort from authorities to regulate digital assets after a massive downturn in the crypto market.
Singapore’s central bank and chief financial watchdog, the Monetary Authority of Singapore (MAS), released proposed measures to cushion retail investors from the risks associated with trading speculative assets. Wednesday’s publication also threw color on possible stablecoin regulatory policies, per the report.
Today’s development comes as part of a larger plan from Singaporean authorities geared towards standardizing its digital asset ecosystem after major companies like Terra and Three Arrows Capital imploded around May 2022. The failure of such crypto stakeholders reportedly cost retail investors billions.
Notably, the consultation paper from the MAS does not seem to suggest an anti-crypto approach to regulations. Authorities instead remarked that “cryptocurrencies play a supporting role in the broader digital asset ecosystem”.
Singapore’s central bank opined that tackling trading risks and enforcing compliance with regulatory standards is a more “feasible” path than outrightly banning virtual currencies.
The proposed measures focus on two key areas. Firstly, Digital Payment Token (DPT) service providers will have to ensure “proper business conduct and adequate risk disclosure” when offering crypto trading facilities to retail investors.
Authorities also proposed a ban on “credit facilities and leverage by retail consumers for cryptocurrency trading”. The move would eliminate debt financing as a crypto capital-generating option for investors.
Secondly, single currency-pegged stablecoins (SCS) like XSGD could fall under the purview of the island state’s Payment Services Act, measures from the MAS suggest. However, such a regulatory structure would only apply to stablecoins issued by local crypto companies.
Wednesday’s publication explained that authorities “will regulate the issuance of stablecoins which are pegged to a single currency (“SCS”) where the value of SCS in circulation exceeds S$5 million.”
Stablecoins have the potential to be a medium of exchange to facilitate transactions in the digital asset ecosystem, provided they are well-regulated and securely backed. The current regulatory framework, which primarily addresses money laundering and terrorism financing risks, and technology and cyber risks, will be expanded to ensure that regulated stablecoins have a high degree of value stability.
The consultation papers asked the public to share feedback on the proposed crypto policies. Users and proponents have until December 21, 2022, to give their input on the matter.
MAS Out To Protect Retail After Investors Lost Billions
Singapore’s central bank, along with other sovereign financial watchdogs, has intensified crypto regulatory efforts after Terra’s ecosystem failure triggered a $40 billion wipeout from investment portfolios.
Crypto hedge fund Three Arrows Capital which operated a headquarters in Singapore also collapsed due to exposure to Terra’s tokens LUNA and UST. Indeed, several crypto companies with billions of retail investments collapsed following Terra’s implosion.
The incident has supposedly fueled greater agitation from regulators calling for more crypto oversight. At press time, the U.K, U.S., South Korea, and Singapore have launched efforts to standardize the burgeoning digital asset ecosystem.