Singapore to Ban Retail Investors From Borrowing to Fund Crypto Purchases


The Monetary Authority of Singapore (MAS), the country’s central bank, is proposing a new measure that will prohibit retail investors from borrowing to fund crypto asset purchases, as part of its effort to reduce the risk of consumer harm from speculative trading in cryptocurrencies.

Recall that in August, the central bank said it was planning to set up a new regulation that will make it difficult for retail investors to trade in cryptocurrencies.

MAS to Prohibit Investors From Borrowing to Purchase Tokens

Per a press release by the bank on Wednesday, the new measure published in two consultation papers includes prohibiting crypto asset service providers from allowing retail investors to use their credit cards or other credit facilities to purchase tokens.

The central bank stated that crypto assets are highly volatile and that leverage can saddle retail investors huge losses. Thus, the bank said in its paper that crypto asset service providers will also be required to provide relevant risk disclosures to enable retail investors to “make informed decisions regarding cryptocurrency trading.” 

Additionally, the proposal includes not allowing the providers to use tokens deposited by retail investors for lending and staking to generate yields. The providers must also make sure customer assets are segregated from their assets.

“Notwithstanding these regulatory measures, consumers must continue to exercise utmost caution when trading in DPTs and must take responsibility for such trading,” the central bank said.

New Measures for Stablecoins

The document also includes new measures for stablecoins – cryptocurrencies whose value is pegged to the price of another asset.

According to the central bank, all stablecoins issued in Singapore must be pegged to the Singapore dollar or a Group of 10 (G10) currency, and fully backed by reserve assets of the same denomination. 

Additionally, minimum capital requirements will be imposed on stablecoin issuers in the country.

As contained in the document, banks in Singapore will be allowed to issue stablecoins, and “no additional reserve backing and prudential requirements will apply.”

“The enhanced regulatory regime for stablecoins aims to support the development of value-adding payment use cases for stablecoins in Singapore,” Ms. Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS, said.

The public has been invited to submit their comment on the proposals by 21 December 2022. If the proposal is successfully implemented, crypto asset platforms will be given a period of six to nine months to comply with the regulation.

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