Singapore Tightens Crypto Regulations to Protect Retail Investors
The new measures will be rolled out in phases, beginning in mid-2024. One of the incoming rules will ban the use of locally issued credit cards to purchase cryptocurrencies.
In a bid to safeguard retail investors amidst the growing number of individuals engaging in digital asset usage, Singapore has taken steps to tighten crypto regulations. The Monetary Authority of Singapore (MAS) recently announced these new measures, aimed at curbing risky practices that often serve as incentivization techniques on crypto platforms.
The new measures will be rolled out in phases, beginning in mid-2024. One of the incoming rules will ban the use of locally issued credit cards to purchase cryptocurrencies. This prevents individuals from investing in the highly volatile market through credit and incurring potential losses. Cryptocurrency platforms will also be prohibited from offering free tokens, trading credits, and leveraged trading as incentives for new sign-ups and referrals. These types of promotional measures can induce risky behavior among retail investors.
The regulator believes such promotional bonuses may trigger risky trading behavior among clients, potentially inducing harmful practices among retail investors. For example, leveraged trading aims to attract traders by allowing them to amplify potential profits. However, it also amplifies losses. As a result, many traders lose all their capital while trading with leverage.
However, the commission also agreed that tighter regulations are not enough to fully protect customers from the inherent uncertainties that are witnessed in the crypto market. Thus, retail traders will also have to exercise a lot of caution when dealing with digital payment token companies and their services, especially those that are unregulated and not locally based.
Ho Hern Shin, MAS deputy managing director for financial supervision, stated:
“We urge consumers to remain vigilant and exercise utmost caution when dealing in DPT services, and to not deal with unregulated entities, including those based overseas.”
These rules will apply equally to all individual cryptocurrency traders in Singapore, including high-net-worth investors who are not accredited or institutional. The MAS believes it has a duty to protect all categories of investors. This regulatory framework seems necessary as participation in crypto-related activities locally continues to rise.
The Need to Protect Singaporeans from Unlincensed and Unregistered Crypto Platforms
Many retail investors seek to benefit from the market’s notorious price volatility. However, this swelling interest has also seen a proliferation of unlicensed firms aiming to capitalize on the surging demand. Many have also collapsed in the last year, raising the need to create regulations to address this.
The MAS has been making a lot of effort to create effective rules by carrying out extensive consultations to get replies and feedback from various stakeholders in the industry. The fall of various unlicensed crypto platforms, including FTX, also made the process necessary and became a matter of urgency. One of the measures that have been put in place to address these issues is ensuring that crypto platforms segregate their customers’ funds and assets in a trust and also limit how tokens can be staked.
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