Investor protections for cryptocurrency may be implemented by the Monetary Authority of Singapore (MAS), which might include restrictions on leverage trading.
Leading Minister of the Monetary Authority of Singapore (MAS), Tharman Shanmugaratnam, says the regulator may limit retail investment in the cryptocurrency sector by enacting new consumer protection measures. Limits on leverage trading, a type of trading that has recently caused a number of crypto traders and businesses to fail, could be one of these.
Crypto: Not a good choice for retail
The minister responded to Murali Pillai, a member of parliament for Singapore’s right-leaning People’s Action Party, in a statement on Monday. In order to prevent “unsophisticated persons” from engaging in “highly risky” crypto trades, the politician inquired as to whether MAS intended to impose stricter regulations on cryptocurrency trading platforms.
Due to their extreme price volatility, the minister reiterated the MAS’s position that cryptocurrencies are “not suitable investments for the retail public.” Recent events, including the sharp decline in price of several cryptocurrencies, have “vividly demonstrated the risks,” the author continued.
Since the peak of the cryptocurrency market in 2017, Bitcoin and other cryptocurrencies have fallen to record lows. The ongoing threat of hawkish central bank policy was a major driver of the market panic, and rising inflation only encouraged the Fed to speed up its interest rate increases.
The collapse of the market and the fall of Terra in May have sparked a chain reaction of failing crypto institutions fighting for financial survival. Many trading and lending platforms, including Celsius, have been forced to halt customer withdrawals as they struggle to settle debt secured by cryptocurrencies.
MAS is currently thinking about “limits on retail participation” and “rules on the use of leverage” when trading cryptocurrencies in light of similar events. However, it acknowledges that international collaboration and coordination will be necessary for such restrictions to be successful given the asset class’s lack of national boundaries.
The MAS minister concluded, “If people borrow money to buy cryptocurrencies, they risk losing more of their investment money.”
Singapore’s Regulation Development
To “trivialize” the risks associated with cryptocurrencies, the MAS imposed restrictions on public advertising of cryptocurrencies in January. It was also one of many jurisdictions that in April tightened the restrictions on the use of digital assets in anti-money laundering and counterterrorism financing activities.
However, the authority has made it clear that it has no plans to impose any broad bans on cryptocurrency transactions. The managing director of MAS acknowledged that cryptocurrency could “lead to a very good outcome for the economy and society” in an interview from last year.