By Mark Ackman
New regulations have been put forward by the financial authorities in Singapore, which is aimed at protecting consumers from the risks involved in crypto trading and investment.
The measures also include including stablecoins in the regulatory framework and they will only be adopted after there has been a discussion about them in the industry.
Draft regulations
The Monetary Authority of Singapore (MAS) has come up with draft regulations that are designed to reduce risks involved in crypto trading for retail investors.
These include restrictions for reducing the risks involved with decentralized digital currencies, but they will encourage the development of stablecoins.
The central bank of the city-state is of the opinion that stablecoins can be used as a medium of exchange and are credible.
The authority published two consultation papers that provide details of the measures that have been proposed and it is looking for industry participants to provide their feedback on them.
It is planning on introducing the said measures as guidelines first before they are incorporated into the Payment Services Act.
The MAS stated that crypto trading is extremely risky, due to which it cannot be deemed suitable for the general public.
The MAS
The monetary authority had also admitted that as digital coins are an integral part of the digital asset ecosystem, it would not be feasible to ban them entirely.
On Wednesday, the MAS said in an announcement that the proposals it had put forward covered three key areas, which were business conduct, consumer access, and technology risks.
The authority further added that it planned on limiting the risks associated with speculative trading and it would accomplish this by implementing certain requirements for crypto service providers.
It would be the responsibility of these companies to provide risk disclosures in order to help their customers in making informed decisions, which include those related to cyber threats and price fluctuations.
The details
A suggestion put forward by the central bank was to not allow retail investors the option of paying with credit.
Moreover, crypto platforms would also be required to keep their own funds separate from their client’s assets and they would not be permitted to lend the assets of investors to third parties.
Nonetheless, despite these measures, ultimately the users will still remain responsible for their actions and decisions.
The upcoming regulations would have to be followed by licensed crypto providers, along with those exempted while waiting for authorization.
But, institutional or accredited investors would not have to follow the new stricter rules. It should be noted that the MAS had a positive stance towards stablecoins that are securely backed and well-regulated.
The authority indicated that it would expand the regulatory framework to include them, so there could be stability.
It further said that its focus would be on issuing stablecoins that are pegged to one currency and the circulation would be more than 5 million Singaporean dollars.
Under the rules proposed, issuers would have to have reserve assets that should be about 100% of the coins’ nominal value.