Singapore may soon require retail investors to test and not use credit card payments and other forms of borrowing to trade cryptocurrencies, the central bank proposed on Wednesday in a series of strict measures as the island nation seeks to make citizens aware of the risks surrounding volatile assets.
The Monetary Authority of Singapore said in a series of consultation papers it is concerned that many retail customers “do not have sufficient knowledge of the risks of trading” digital payment tokens, which could lead them to “take greater risks than they otherwise would have done.” “. have been willing or able to endure.”
The central bank also proposed that crypto firms licensed under the country’s Payments Services Act be banned from lending to private investors in a move that could topple the businesses of many companies.
While “the latter option is stricter than the regulatory treatment of retail client securities under the SFA38,” the central bank acknowledged, “the MAS believes the increased risk of consumer harm in this unregulated space may require more stringent measures for retail clients. ”
Several popular crypto exchanges already require their customers to periodically go through questionnaires before being allowed to trade crypto and participate in derivatives trading. the central bank recognized [PDF] A number of industry players favor some form of assessment of retail customer knowledge of risk, but said they should also disclose when they have a financial interest in the tokens they offer to customers.
The new guidelines, which are open for public consultation until December 21, also propose that crypto service providers should not use incentives such as giving away free tokens or other gifts to judicial retail customers. It also suggested banning celebrity endorsements.
The central bank has also proposed that stablecoin issuers provide adequate information about their tokens and hold reserves in cash, cash equivalents or debt securities that are “at least equal to 100% of the face value of the outstanding “tokens in circulation” at least once. “
The debt securities, the proposal says, should be issued by the central bank of the pegged currency or organizations that are both governmental and international in character with a credit rating of at least AA—.
“SCS” [single-currency pegged stablecoins] issuers must obtain an independent statement, for example from external audit firms, that the reserves meet the above requirements on a monthly basis. This certificate, including the percentage value of the reserves above the nominal value of the outstanding SCS in circulation, must be published on the issuer’s website and by the end of the following month (for the month being attested) to the MAS are submitted.” the proposal say [PDF]adding that issuers must also appoint an external auditor to conduct an annual audit of their reserves and submit the report to the MAS.
The proposal marks a significant shift in Singapore’s stance on crypto. Once a favored global crypto hub for its policies, Singapore’s authorities have tightened their view on digital assets following the collapse of a slew of companies, including Terraform Labs’ stablecoin UST and native token LUNA, and hedge fund Three Arrows Capital.
“The collapse of a number of cryptocurrency trading platforms, where a few had engaged in strike or lending activities, had caused significant consumer harm,” the central bank said.