The Monetary Authority of Singapore (MAS) has announced plans to reduce crypto trading risks and support stablecoins through increased regulation.
The Monetary Authority of Singapore (MAS) published two consultation papers proposing regulatory frameworks to reduce investors’ risk in crypto trading and support stablecoins for transactions. The measures, which include consumer protection, business conduct rules, and technology risks Reduction are part of the Payment Services Act. Retail investors will not be able to use credit cards or borrow funds for buying cryptocurrencies under the proposed regulations
On October 26, The Monetary Authority of Singapore announced in a press release that they are considering methods to reduce risks for retail investors who trade cryptocurrencies. In addition, they would like to regulate the issuance stablecoins (a type of cryptocurrency) that are pegged to another currency.
Given that cryptocurrencies are integral to the digital asset landscape, the MAS has decided not to ban them. As a result, crypto trading providers like exchanges must make sure they engage in fair business practices and disclose risks adequately.
In order to mitigate risk, the crypto service providers must take measures such as prohibiting retail investors from using credit cards and leverage for crypto trading. They will also need to handle segregation of customers’ assets and complaints. As far as technology risks go, the MAS wants companies to maintain high availability and recoverability of critical systems.
MAS requires stablecoin issuers to publish a white paper which details subjects such as redemption rights. In addition, MAS will regulate stablecoins as a means of exchange in the digital asset domain ecosystem. Its objective is to broadened the regulatory Principles for stabilized coins so that there is an increase in value stability worldwide.
The MAS prefers well-regulated and securely backed stablecoins. Also, banks can issue stablecoins without having to increase their reserve backing or prudential requirements. The deadline for comments on the proposals is December 21st.
Ms Ho Hern Shin, Deputy Managing Director of the MAS, said:
“The two sets of proposed measures mark the next milestone in enhancing Singapore’s regulatory approach to foster an innovative and responsible digital asset ecosystem.”
The recent failure of many cryptocurrency companies based in Singapore has led to a more strict governmental stance on digital assets. The proposed regulations would also prevent users from staking or lending their cryptocurrencies to generate yield.
The recent string of crypto firm failures in Singapore, including Three Arrows Capital, Terraform Labs, Zipmex, Vauld, and Hodlnaut,, has prompted the introduction of a new regulatory framework. Coinbase and Blockchain.com are two firms that have recently received licenses to operate in Singapore.