With adoption on the rise, regulating the crypto industry has become one of the top priorities of governments across the world. On one hand, a few nations have been relaxing rules to foster growth. The majority of them, on the other hand, have been cautiously tightening the screws.
On Wednesday, the Singapore central bank presented two proposals entailing new regulatory measures associated with stablecoins and crypto trading. In hindsight, it intends to reduce customers’ risk of being exposed to the high volatility of the crypto industry.
Among the list of suggestions in the digital payment token services consultation paper, the bank has proposed to prohibit retail investors from borrowing to fund crypto purchases. Other suggestions included stopping companies from using tokens deposited by retail investors for lending or staking to fetch yields.
Also Read: Singapores’ Largest Bank expands Crypto Trading for Qualified Clients
No blanket ban on crypto services
Furthermore, the Monetary Authority of Singapore said that it discouraged the public from speculative trading in cryptos. The proposal stressed that crypto prices are “highly volatile” and leverage could burden customers with hefty losses.
Further extending its no-credit proposition, it also added that providers of digital payment token services should not accept payments from retail customers using credit cards, charge cards, or other credit facilities. The restrictions, however, do not apply to high-net-worth investors. It wrote in the paper,
“Retail customers are generally regarded as less able to access professional advice and have fewer resources to protect their interests, as compared to institutional investors or more well-resourced customers.”
The central bank clarified that it rejected entirely banning crypto services for retail consumers because that could lead them to depend on unlicensed platforms.
To improve business conduct, the MAS proposed that service providers suitably segregate customers’ assets from the company’s assets. In fact, the bank is also seeking feedback on whether providers should appoint an independent custodian to hold customers’ assets.
Stablecoins—on their part—will need to be pegged to the local dollar or a Group of 10 currency and be fully backed by reserve assets of the same denomination, per the paper. Minimum capital requirements will be imposed on issuers too.
Community reactions
Opining on the latest proposals, Michael Wu—Co-Founder and Chief Executive Officer of the Singapore-based Amber Crypto Platform—told Bloomberg,
“The latest proposed steps could affect trading volumes and revenues of crypto exchanges and lenders who have large retail exposure.” Still, the rules “will be good in the long term.”
Chia Hock Lai—Co-Chairman of the Blockchain Association Singapore—on the other hand, felt that the latest roadmap is potentially “excessive.” He said that the association hoped that the monetary authority would “reconsider the merits of effecting some of the proposals at this point in time.”
The window for feedback on the consultation paper is open until December 21. Post that, the final guidelines will be set. Digital-asset service providers will then have a period of six to nine months to adhere to and implement the rules.
Also Read: No data on Public Crypto HODLings: Singapore Central Bank