SINGAPORE - The size of the cryptocurrency market in Singapore remains small, Senior Minister Tharman Shanmugaratnam said on Monday (April 5).

The combined peak daily trading volume of three major cryptocurrencies quoted in Singdollar - bitcoin, ethereum and XRP2 - was 2 per cent of the average daily trading volume of securities on the Singapore Exchange in 2020, he pointed out.

Mr Tharman, who is also the Monetary Authority of Singapore (MAS) chairman, was responding to questions in Parliament from Mr Desmond Choo (Tampines GRC) and Mr Murali Pillai (Bukit Batok) on the crypto asset market in Singapore and how these exchanges are regulated.

Cryptocurrencies such as bitcoin, which may be used for payment purposes, are one of two common types of crypto assets, said Mr Tharman.

They can be highly volatile as their value is typically not related to economic fundamentals, he added.

"They are hence highly risky as investment products, and certainly not suitable for retail investors," said Mr Tharman, who noted that MAS had issued numerous consumer advisories to warn the public of the risks of trading these products.

Securities tokens, which are digital representations of traditional securities such as shares and bonds, are another common type of crypto assets.

Mr Tharman said the size of the securities tokens market is also small in Singapore.

Only three of the more than 60 recognised market operators currently regulated by MAS under the Securities and Futures Act offer the trading of securities tokens. Trading volumes are very small.

Recognised market operators are also not allowed to offer their products to retail investors.

MAS has also taken steps on three fronts to address the money-laundering and terrorism-financing risks related to cryptocurrencies.

Firstly, digital payment token service providers need to be licensed.

These providers are entities involved in providing cryptocurrency-related services. They must comply with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) requirements, such as obligations to perform customer due diligence and transaction monitoring.

Secondly, MAS has stepped up surveillance of the cryptocurrency sector to identify suspicious networks and higher risk activities for further supervisory scrutiny.

Finally, MAS is raising public awareness on the risks of investing in digital payment tokens. MAS will work with the Commercial Affairs Department to continue to raise public awareness on the risks, said Mr Tharman.

He noted that the crypto assets space is constantly evolving, but MAS has been "closely monitoring developments and will continue to adapt its rules as needed to ensure that regulation remains effective and commensurate with the risks posed".

"Investors, on their part, should exercise extreme caution when trading cryptocurrencies," he added.

MEASURES TAKEN BY MAS

• Digital payment token service providers need to be licensed.

• MAS has stepped up surveillance of the cryptocurrency sector to identify suspicious networks and higher-risk activities for further supervisory scrutiny

• MAS is raising public awareness on the risks of investing in digital payment tokens