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Updated with comments from Circle (28 Nov)
In the ever-evolving landscape of digital finance, regulatory authorities worldwide are intensifying their focus on consumer protection and market integrity. Singapore is no exception to this trend. Late last week, the Monetary Authority of Singapore (MAS) unveiled a comprehensive set of measures aimed at safeguarding consumers and fostering responsible growth in the digital asset space.
These measures, which were first consulted on in October 2022, have been eagerly anticipated by the industry.
- Retail Investor Restrictions: MAS has imposed a series of restrictions on retail investors. These include mandatory customer risk awareness tests for accessing crypto services, a ban on incentives for both prospective and existing customers (including sign-up bonuses, referral rewards, and trading incentives), and a prohibition on credit facilities and leveraged transactions. While local credit card payments for crypto will not be allowed, international cards will be accepted. Additionally, lending and staking services will be restricted.
- Definition of Retail Investor: To protect retail investors, the default classification will be retail unless individuals meet the criteria for accredited investor (AI) or institutional investor (II). Cryptocurrency holdings can be factored into determining AI status, subject to a 50% haircut and a cap of S$200,000. These measures apply to both local and international customers.
- Conflict of Interest: Regulated crypto players can engage in proprietary trading under specific conditions, subject to Chinese walls, legal separation, and full disclosure. Listing and governance policies must also be transparent, and customer crypto and fiat assets must be held in trust, with 90% of crypto stored in cold wallets.
- Tech & Cyber Risk: Regulated crypto entities will be subject to the same stringent tech and cyber risk management requirements as systematically important payment systems.
Licensed crypto exchanges and industry leaders have responded to these measures with optimism and enthusiasm.
"We are supportive of MAS’ regulatory measures that enhance overall customer protection and foster a responsible digital asset ecosystem," Yam Ki Chan, vice president, strategy and policy for Circle, told Blockhead.
We are entering a new phase of building in the digital ecosystem. Regulatory clarity is coming around the world. These guidelines will permission in good actors while addressing risks from bad actors in the ecosystem and provide the clarity that major companies need to invest seriously in their Web3 transition.
Lasanka Perera, CEO of Independent Reserve Singapore, commended MAS' guidelines, describing them as a "positive step towards fostering a more responsible and regulated cryptocurrency industry." He also noted that the measures would raise the bar for digital payment token service providers (DPTSPs) and serve as a reference for other jurisdictions.
"With the implementation and enforcement of these measures by regulated DPTSPs, investors can have confidence that their interests are prioritised - in contrast to unregulated or offshore entities operating within the same domain."
Perera also highlighted the innovative approach towards assessing accredited investors' net worth, which now includes digital payment tokens. According to him, this reflects a progressive integration into traditional financial systems.
Coinbase, one of the leading names in the crypto space, conducted research that revealed Singaporeans' resilient optimism regarding digital assets as the future of finance. Hassan Ahmed, country director at Coinbase Singapore, praised MAS for its forward-looking regulatory approach. He specifically commended the regulator's focus on strengthening regulatory foundations related to custody, cybersecurity, and consumer safeguards.
"The Monetary Authority of Singapore is a forward-looking regulator, and we welcome their approach towards strengthening regulatory foundations around custody, cyber hygiene, and consumer safeguards."
Ahmed emphasized Coinbase's commitment to compliance:
"At Coinbase, we’re working hard to help update the financial system by building products that expand the utility and adoption of crypto. To achieve our goal of bringing over 1 billion people into crypto, we’re committed to providing a secure, compliant, and trusted platform for users to access the cryptoeconomy."
Striking a Balance
MAS' regulatory approach appears to strike a balance between nurturing innovation and ensuring investor protection.
"Regulators are also taking much needed actions to address bad actors. This is necessary for the industry to mature and to build a safe and secure digital asset ecosystem that can handle trusted, day-to-day transactions at scale," Circle's Chan said.
While some measures are stringent, such as the ban on incentives and lending services, others provide flexibility. Notably, crypto assets counting toward accredited investor determination reflects a progressive integration into traditional finance.
The move aligns with a global trend of regulatory authorities recognizing the transformative potential of digital assets and blockchain technology while acknowledging the need for safeguards. As the digital asset ecosystem continues to evolve, the latest measures position Singapore at the forefront, fostering a secure and reliable crypto market.
Blockhead also reached out to Paxos and Crypto.com for the story but did not receive a response.