Singapore is mulling over additional rules in cryptocurrency trading that it says are necessary to safeguard the general public. These may include restrictions on retail trading and the use of leverage in cryptocurrency transactions.
The revelation comes weeks after repeated warnings from the government that cryptocurrencies, due to their "sharp speculative price swings", are unsuitable retail investments for the public.
Recent market events clearly demonstrated the risks with prices of several cryptocurrencies dipping significantly, said Senior Minister and Minister in Charge of Monetary Authority of Singapore (MAS) Tharman Shanmugaratnam. In a written response issued Monday to a parliamentary question, he said MAS since 2017 had issued cautionary notes about cryptocurrency investments.
Noting that the industry regulator already had taken steps that went further than most others, Tharman said MAS in January restricted the marketing and advertising of cryptocurrency services in public areas as well as barred the portrayal of cryptocurrency trading as trivial.
He added that digital payment token service providers since had adhered to the rules, which included the removal of both cryptocurrency ATMs and advertisements from public areas and public transport venues.
Under the country's Payment Services Act, MAS was empowered to implement further measures to ensure better consumer protection, maintain financial stability, and safeguard the effectiveness of its monetary policies, the minister said.
Tharman said: "MAS has been carefully considering the introduction of additional consumer protection safeguards. These may include placing limits on retail participation and rules on the use of leverage when transacting in cryptocurrencies. Given the borderless nature of cryptocurrency markets, however, there is a need for regulatory coordination and cooperation globally. These issues are being discussed at various international standard setting bodies where MAS actively participates."
The European Union last week reached a provisional agreement on cryptocurrency regulations that 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 instance, under the new rules, cryptocurrency service providers must adopt "strong requirements" to protect consumers wallets and would be held liable when investors' assets were lost.
French Minister for the Economy, Finance, and Industrial and Digital Sovereignty, Bruno Le Maire, said: "Recent developments on this quickly 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 the misuse of crypto-assets, while being innovation-friendly to maintain the EU's attractiveness."
MICA still is subject the approval of the Council and European Parliament, before going through formal adoption procedures.
Singapore, though, had stressed the importance of driving the development of underlying technologies often associated with cryptocurrencies, specifically, blockchain.
Deputy Prime Minister and Coordinating Minister for Economic Policies, Heng Swee Keat, said last month efforts were needed to bring out the best potential of emerging technologies while mitigating the risks.
For instance, he said a consortium was set up to ensure the responsible use of artificial intelligence (AI) in the financial sector and this led to the release of whitepapers and toolkits to guide the industry.
The same approach should be applied to drive the upsides and minimise the downsides of Web 3.0 developments, Heng said, pointing to distributed ledgers and tokenisation, which drove transparency and cost savings.
"Crypto assets have more recently been in the spotlight for the wrong reasons. This, however, does not reflect where the greatest value of blockchain and digital assets lies, much of which is away from the retail glare," 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 wholesale cross-border transactions.
MAS in May announced plans to pilot use cases of asset tokenisation and assess the feasibility of autonomous trading powered by blockchain technology. Efforts here would include the development of interoperable networks to facilitate digital asset trading as well as an evaluation of regulations needed to safeguard against potential risks.
According to a study released last August, 67% of personal investors in Singapore held cryptocurrencies with 78% owning Ethereum and 69% holding Bitcoin.
Investments in Singapore's fintech sector also grew 47% year-on-year to hit $3.94 billion last year, with blockchain and cryptocurrencies raking in almost half of the funds with $1.48 billion across 82 deals, according to KPMG.