Bitcoin on top of a smartphone.

SINGAPORE: On Thursday, Nov 23, the Monetary Authority of Singapore MAS revealed stricter rules for cryptocurrency trading, tightening regulations for crypto transactions. These rules, set to take effect in phases from mid-2024, are part of the regulatory body’s ongoing efforts to manage the risks associated with cryptocurrency trading.

Retail customers engaging with Singapore-regulated providers of digital payment token (DPT) services will face restrictions on using local credit cards for purchasing cryptocurrencies. Additionally, they will undergo risk awareness assessments due to the volatile nature of DPT prices. The move comes as MAS finalises its proposed rules for the cryptocurrency sector.

In a bid to protect retail users, MAS has outlined several conditions for crypto service providers. These include:

  • Determining a customer’s risk awareness to access DPT services
  • Not offering any incentives to trade in cryptocurrencies
  • Not providing financing, margin or leverage transactions
  • Not accepting locally issued credit card payments and
  • Limiting the value of cryptocurrencies in determining a customer’s net worth
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MAS emphasises that providers must treat all customers as retail customers by default, with institutional investors being the exception, as reported by Singapore Law Watch. Accredited investors, individuals with at least S$2 million in net personal assets, must opt-in to be treated as such.

The regulator’s rules for determining accreditation status consider no more than 50% of the value of DPT holdings or up to S$200,000, whichever is lower. However, MAS allows flexibility, permitting crypto players and financial institutions to adopt their own valuation models as long as they achieve an equally prudent outcome.

In addition to consumer safeguards, the rules include business conduct guidelines for crypto service providers. These encompass identifying, mitigating, and disclosing conflicts of interest, along with establishing effective policies and procedures for handling customer complaints and dispute resolution.

Regarding technology and cyber risk, MAS requires DPT service providers to maintain high availability and recoverability of their critical systems, aligning with current requirements for financial institutions. The regulator assures a suitable transitional period for providers to implement these measures effectively.

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Legal experts weigh in on the implications for retail consumers. Robson Lee, a partner at Kennedys Law, urges caution, emphasising that all investments carry risks. He warns against blind trust in crypto operators, highlighting the potential risks of unwittingly supporting money laundering or illicit schemes.

David Gerald, founder and CEO of the Securities Investors Association (Singapore), acknowledges the regulatory safeguards but underscores the inherent risks in cryptocurrency investments. “No amount of regulations can protect the retail investors fully; everyone must know they are taking a huge risk when investing in cryptocurrencies,” he cautions.

MAS’s finalised measures follow a year of consultations and proposed legislative amendments. The regulatory body aims to prevent a recurrence of investor losses experienced in 2022 when cryptocurrency firms face financial difficulties. MAS’s focus on stablecoin issuers in August further demonstrates its commitment to creating a secure and regulated cryptocurrency environment in Singapore.

Ho Hern Shin, Deputy Managing Director for Financial Supervision at MAS, acknowledges the speculative and risky nature of cryptocurrency trading. While the new measures aim to safeguard retail investors, she emphasises the need for consumers to remain vigilant and exercise caution when dealing with DPT services./TISG