Singapore’s MAS Proposes Restrictions on Retail Crypto Trading

The Monetary Authority of Singapore (MAS) published two consultation papers on Wednesday, proposing new regulatory rules around cryptocurrency trading and circulation of stablecoins.

The proposed rules focus on minimizing the risks of cryptocurrencies to which retail investors are exposed.

“MAS is concerned that retail customers may not have the financial wherewithal to withstand large losses that are likely to ensue from speculative trading of markets that they do not fully understand,” one of the consultation papers stated.

If implemented, the rules would prohibit cryptocurrency lending services to retail investors. Further, businesses need to segregate customer assets from their own assets.

Singapore will not allow companies to offer incentives for acquiring crypto customers. Also, businesses in Singapore cannot accept credit cards for selling cryptocurrencies or provide financing options to retail traders.

Additionally, the proposal might need companies to test the financial knowledge of retail customers. However, these requirements would not apply to AI-based trading systems or institutional investors.

Making Stablecoins Safe

The focus of the regulator is on stablecoins. While stablecoins pegged to are not volatile like other cryptocurrencies, the collapse of Terraform Labs exposed the sector's vulnerabilities.

MAS now wants issuers of single currency-pegged stablecoins with a circulation value of more than SG$5 million to hold reserves in cash, cash equivalents, or short-dated sovereign debt securities of at least 100 percent of the circulation value. On top of that, the holding assets should be denominated in the same currency as the pegged currency. Moreover, there will be a minimum base capital requirement of SG$1 million or six-month operating expenses.

Companies in Singapore can only issue stablecoins pegged to the Singapore dollar or any other G10 currencies.

Singapore is home to several prominent crypto startups. MAS has stringent registration rules and is now regulating 18 crypto companies, including Blockchain.com and Coinbase. Binance, on the other hand, has shuttered its Singapore operations.

“Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” MAS said.