In a bid to reduce risks to consumers and enhance the stability of the digital asset ecosystem, Singapore has tightened its regulations on cryptocurrency trading. The Monetary Authority of Singapore (MAS) has proposed a series of measures to ensure proper business conduct and risk disclosure by digital payment token (DPT) service providers.
DPT service providers will now be required to provide relevant risk disclosures to retail consumers, enabling them to make informed decisions regarding cryptocurrency trading. They will also be prohibited from allowing the use of credit facilities and leverage by retail consumers for cryptocurrency trading. These measures aim to protect consumers from the speculative and highly risky nature of DPT trading.
Under the proposed regulatory framework, DPT service providers will have to implement proper segregation of customers’ assets, mitigate conflicts of interest, and establish effective processes for complaints handling. Additionally, they will be required to maintain high availability and recoverability of their critical systems, similar to other financial institutions.
MAS recognizes the potential of stablecoins as a medium of exchange in the digital asset ecosystem. To ensure their value stability and regulatory oversight, MAS will regulate the issuance of stablecoins pegged to a single currency when the value in circulation exceeds S$5 million. The proposed requirements include holding reserve assets equivalent to 100% of the outstanding stablecoins, denominated in the same currency as the pegged currency. Stablecoin issuers will also be required to publish a white paper disclosing details of the stablecoin and its redemption rights for holders.
It’s worth noting that banks in Singapore will be allowed to issue stablecoins without additional reserve backing and prudential requirements, given the rigorous capital and liquidity frameworks they already adhere to. To help customers distinguish between regulated and unregulated stablecoins, DPT service providers will clearly label the MAS-regulated stablecoins. This labeling aims to inform customers about the risks involved in using unregulated stablecoins .
The new regulatory measures come after MAS issued guidelines in January 2022, discouraging cryptocurrency trading by the general public. MAS emphasized the highly risky nature of cryptocurrency trading and the unsuitability for the general public. The guidelines outlined that DPT service providers should not promote their services to the general public through various channels such as public advertisements or the engagement of third parties .
These regulatory developments in Singapore’s crypto sector are expected to impact some providers, particularly those that are licensed or seeking licensure and have operations that would violate the upcoming rules. Market sources suggest that the new regulations are not surprising, although industry players had hoped for more flexibility .
Ms. Ho Hern Shin, Deputy Managing Director (Financial Supervision) at MAS, emphasized that regulations are necessary to foster an innovative and responsible digital asset ecosystem. As Singapore continues to explore the potential benefits of tokenization and distributed ledger technology, MAS remains committed to making appropriate adjustments to its regulatory regime to address associated risks .
In conclusion, Singapore’s tightened regulations on cryptocurrency trading aim to enhance consumer protection and stability in the digital asset ecosystem. The proposed measures will ensure proper business conduct, risk disclosure, and high availability of critical systems by DPT service providers. Additionally, the regulation of stablecoins will promote their value stability and establish regulatory oversight. These regulatory changes reflect Singapore’s commitment to fostering an innovative and responsible environment for digital assets.