Singapore to Tighten Regulations After String of High-Profile Crypto Bankruptcies
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Singapore to Tighten Regulations After String of High-Profile Crypto Bankruptcies

Singapore aims to ban retail users from debt-financed and leveraged crypto trading.
Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Singapore has proposed new rules for retail crypto investors, including a ban on leveraged crypto trading. The move comes after several high-profile crypto-related companies operating in the country collapsed this year, resulting in millions in losses for retail users. 

Singapore to Stiffen Crypto Regulations

The Monetary Authority of Singapore (MAS) has put forward several new proposals in a bid to tighten up crypto regulations for retail crypto investors. In the first place, the regulator is seeking to ban retail users from debt-financed and leveraged crypto trading, including trading via credit cards.

The MAS noted that it will adopt a risk-focused stance when regulating crypto markets. In a consultation paper, the agency said:

“MAS will adopt a risk-focused approach to regulating the digital asset ecosystem. To facilitate innovation in digital assets, regulations need to be clear and proportionate to the risks posed. These regulations should be periodically reviewed to ensure that they remain relevant, given the pace of innovation.”

Another suggested regulation involves crypto service providers offering incentives to retail customers, including free trading credits or tokens, and airdrops. The regulatory agency also intends to prohibit crypto companies from lending out their retail customers’ funds. 

“MAS proposes that DPTSPs [digital payment token service providers] should not mortgage, charge, pledge or hypothecate the retail customer’s DPTs [digital payment tokens]. For non-retail customers, DPT service providers should provide a clear risk disclosure document and obtain the customer’s explicit consent.”

In crypto, leveraged trading refers to using the borrowed fund to trade cryptocurrencies. This potentially gives the trader the chance to profit bigger, but it also amplifies losses if things go sour. Crypto exchanges offer up to 100x leverage on some coins. 

Notably, the MAS issued a second consultation paper dated October 26 that is focused on regulating stablecoins. The paper suggests that stablecoins should be either pegged to the Singapore dollar or Group of Ten currencies, like the dollar, pound, euro, and more. 

“The reserve assets must be held with licensed banks, merchant banks, finance companies, or capital market services licensees (CMSLs) providing custodial services in Singapore. Where the SCS issuer is a bank in Singapore, the reserve assets can be held under its own custody.”

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Singapore Ramps Up Regulatory Efforts After Recent Bankruptcies

After China’s crackdown on crypto last year, Singapore became a hotbed for crypto companies, mainly thanks to its progressive stance toward the emerging digital asset class. The country’s crypto-friendly stance has helped it attract crypto companies, but some of the biggest names failed during the recent crypto meltdown. 

For instance, Blockchain payment network Terra, which had set up its Southeast Asia hub in Singapore, failed in May this year. Likewise, crypto fund Three Arrows Capital, which filed for Chapter 15 bankruptcy in early July, was based in Singapore. Other examples include Vauld, Zipmex, and Hodlnaut.

Arguably, the unprecedented fall of some high-profile crypto businesses has forced Singaporean authorities to consider imposing restrictions on the use of leverage and credit facilities. The country has also announced more regulations aimed at stablecoins

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Do you support the MAS’ decision to ban retail traders from using leverage? Let us know in the comments below.