Singapore will ban retail investors from using credit cards to trade cryptocurrencies
Singapore may soon require retail investors to be tested and not use credit card payments and other forms of lending to trade cryptocurrencies, the central bank on Wednesday proposed a series of strict measures as the island nation hopes to make citizens aware of the risks surrounding volatile assets.
In a set of consultation papers, the Monetary Authority of Singapore said it was concerned that many retail customers may have “lack of adequate understanding of the risks of trading digital payment tokens,” which could lead them to “take higher risks than they would otherwise be willing or able to.” bear. "
The central bank also proposed that crypto firms licensed under the country’s Payment Services Act should not be allowed to lend to retail investors, a move that could overturn the business of many.
Although “the latter option is more stringent than the regulatory treatment of retail client securities under SFA38,” the central bank admits, “MAS believes that the increased risk of consumer harm in this unregulated area may require a more stringent approach to retail clients. strict measures."
Some popular cryptocurrency exchanges already require their clients to regularly screen questionnaires before they are allowed to trade cryptocurrencies and participate in derivatives trading. The central bank acknowledges [PDF] that many industry players support some form of assessment of retail customers’ risk knowledge, but says they should also disclose when they have a financial interest in tokens offered to customers.
The new guidelines, which are available for public consultation until Dec. 21, also recommend that crypto service providers should not use incentives such as free tokens or other gifts to retail customers. It also proposed banning celebrity endorsements.
The central bank also recommends that stablecoin issuers make full disclosure of their tokens and hold reserve assets in the form of cash, cash equivalents or debt securities "at least equal to 100% of the face value of outstanding tokens in circulation" times. "
Debt securities should be issued by the central bank of the pegged currency or by governments and international organizations with a credit rating of at least AA-, the proposal said.
“SCS [single currency-pegged stablecoins] issuers must obtain monthly independent attestation, such as an external audit firm, that the reserve assets meet the above requirements. This attestation includes the percentage value of the reserve assets over the face value of the issued SCS in circulation , must be published on the issuer’s website and submitted to MAS by the end of the next month (the month to be certified),” the proposal said [PDF], adding that the issuer must also appoint an external auditor of its reserve assets Conduct annual audits and submit reports to MAS.
The proposal marks a major shift in Singapore’s stance on cryptocurrencies. The Singaporean authorities were once the global crypto center of choice for their policies, but their view on digital assets has changed after the collapse of a string of firms including Terraform Labs' stablecoin UST and native token LUNA and hedge fund Three Arrows Capital tough.
“The collapse of some cryptocurrency exchange platforms, some of which engaged in staking or lending activities, resulted in significant harm to consumers,” the central bank said.