Stablecoins And Crypto Trading Are Regulated In Singapore
The Monetary Authority of Singapore (MAS) has released two consultation papers outlining stringent regulatory measures that would lower consumer risk associated with cryptocurrency trading while promoting the growth of stablecoins as a reliable means of exchange.
The central bank of Singapore claims that cryptocurrency trading is very dangerous and not suited for the general population. It does accept that it would be impossible to outright outlaw cryptocurrencies because of their supporting function in the larger ecosystem of digital assets.
Instead, it is putting up strict new guidelines for Digital Payment Token (DPT) service providers that are intended to deter people from casually trading cryptocurrencies. These include requiring customers to take a test to determine their familiarity with cryptocurrency risks, prohibiting retail users from borrowing money or accepting credit card payments to buy cryptocurrency, and banning cryptocurrency-related incentives like free tokens, gifts, or celebrity endorsements.
Firms will also be required to provide explicit risk management measures, segregate client funds from their own assets, and reveal the selection and listing of tokens rules and processes.
The central bank has chosen a more nuanced approach to the use of stablecoins as a medium of exchange, even if the recommendations are expected to slow down the expansion of speculative activity in cryptocurrency trading.
The present regulatory framework, which mainly covers issues related to money laundering and terrorist funding as well as technical and cyber threats, will be broadened in an effort to guarantee that authorised stablecoins have a high level of value stability.
In order to accomplish recovery or a smooth wind-down, non-bank stablecoin issuers will also be obliged to keep liquid assets valued at a larger percentage of yearly operating expenditures than 50%.
When the SCS is issued as a tokenized version of bank obligations, there won’t be any extra reserve backing or prudential requirements applicable to the regulated banking industry.
Ho Hern Shin, deputy managing director, MAS, comments: “The enhanced regulatory regime for stablecoins aims to support the development of value-adding payment use cases for stablecoins in Singapore. As we continue to partner industry players to explore the potential benefits of tokenisation and distributed ledger technology, MAS will make appropriate adjustments to its regulatory regime to address the associated risks.” ember 2022.
