MAS eyes curbs on retail access to crypto trading

Singapore's regulators are looking at making it harder for the public to buy cryptocurrencies, but will not ban such trading activities.

The Monetary Authority of Singapore (MAS) is contemplating having customer suitability tests and restricting the use of leverage and credit facilities for crypto trading, its chief Ravi Menon said at a seminar yesterday.

MAS regards cryptocurrencies as unsuitable for use as money and as "highly hazardous" for retail investors to dabble in as they are extremely volatile, he said. The market is fraught with risks of market manipulation, and speculation in crypto "is what MAS strongly discourages and seeks to restrict".

But many consumers "seem to be irrationally oblivious" and are still enticed by the prospect of sharp crypto price increases.

Given that the digital asset space is borderless, banning retail access to crypto is not likely to work, Mr Menon added. "With just a mobile phone, Singaporeans have access to any number of crypto exchanges in the world," he said.

Since January, MAS has restricted digital asset players from promoting cryptocurrency services in public spaces. A few months later, Singapore-based virtual asset service providers doing business overseas were required to be licensed in the city.

Now, the regulator is under pressure as investors cry foul following the crash of stablecoin TerraUSD and sister token Luna in May. That sparked a domino effect that has landed key players including hedge fund Three Arrows Capital, exchanges Zipmex and Vauld, as well as lender Hodlnaut, in insolvency woes. Withdrawals were suspended as the firms sought legal protection from creditors, leaving investors high and dry.

The crash coincided with and worsened a crypto rout that sent prices of crypto darling Bitcoin to under US$20,000, a far cry from its peak of US$60,000 last November.

Speaking to about 100 people in a session that was also streamed online to nearly 3,000 others, Mr Menon said that by October, the industry will hear about MAS' proposals on how to regulate stablecoins.

MAS sees good potential in stablecoins, but they have to be securely backed by high-quality reserves and be well regulated, Mr Menon said. Globally, regulators are looking to impose stablecoin requirements such as secure reserve backing and timely redemption at par by then too, he added.

As the digital asset ecosystem develops, the links between the traditional banking system and digital assets will grow. MAS is working closely with other regulators to design a prudential framework for banks' exposures to digital assets.

Mr Menon also touched on the industry's frustration with MAS' lengthy licensing process.

So far, about a dozen entities have permits to operate as digital service token providers - out of nearly 200 applicants.

Mr Menon said MAS cannot compromise on its due diligence process. "Given the large number of applicants for licences, we have been prioritising those who demonstrate strong risk-management capabilities and the ability to contribute to the growth of Singapore's fintech and digital asset ecosystem," he noted.

Mr Chen Zhuling, founder of blockchain fintech firm RockX, said Singapore's value proposition to crypto companies was never about the domestic retail market.

What Singapore offers is its "large institutional base with access to many high-net-worth individuals", as well as a stable and business-friendly environment.