Singapore plans to implement new regulations that will make it more difficult for retail investors to trade cryptocurrencies at a time when they appear to be “irrationally oblivious” to the risks, according to the country’s central bank chief.
Despite warnings and measures, said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), at an event on Monday, surveys show that consumers are increasingly trading in cryptocurrencies globally, not just in Singapore, drawn by the prospect of sharp price increases.
“They appear to be irrationally unaware of the risks associated with cryptocurrency trading,” he said.
The MAS was considering “adding frictions” to retail access to cryptocurrencies, he said.
“These could include customer suitability tests and limiting the use of leverage and credit facilities for cryptocurrency trading,” he said at a seminar titled “Yes to digital asset innovation, No to cryptocurrency speculation.”
Singapore’s welcoming attitude has helped the financial hub attract digital asset services-related firms from China, India, and other countries in recent years, propelling it to prominence in Asia.
However, recent defaults by some global cryptocurrency-related firms based in Singapore, many of which are not subject to the financial regulator’s consumer protection or market conduct guidelines, have raised concerns about tighter regulation.
Menon stated that the MAS will seek public feedback on its proposals by October, and that regulators around the world are conducting their own reviews.
The MAS issued guidelines in January limiting cryptocurrency trading service providers’ ability to promote their services to the general public.
Cryptocurrencies have plummeted this year as investors flee riskier assets as interest rates in the United States rise and inflation soars.
“MAS’s accommodating stance toward digital asset activities and its restrictive stance toward cryptocurrency speculation are not contradictory,” Menon
Gemini, a US-based cryptocurrency exchange, and Huobi, a Chinese-focused cryptocurrency exchange, are among those with a significant presence in Singapore.
Under a new regime, approximately 180 crypto companies applied for a crypto payments licence with the MAS in 2020, but Singapore has only issued about two dozen licenses so far after an extensive due diligence process that is still ongoing.