Singapore is considering introducing additional restrictions on cryptocurrency-related activities in the city-state, particularly on who can invest in the emerging asset class, following recent events that have shaken the market.

In a parliamentary reply published on the website of the Monetary Authority of Singapore, MAS chairman and Singaporean senior minister Tharman Shanmugaratnam affirms that cryptocurrencies “are not suitable investments for the retail public”.

The regulator is “carefully considering” the introduction of additional consumer protection safeguards. “These may include placing limits on retail participation, and rules on the use of leverage when transacting in cryptocurrencies,” Shanmugaratnam says. 

Singapore has ambitions to become a digital asset hub, and several crypto market players have sought to either establish their base of operations in the country or project the impression that they are operating under its regulatory supervision.

But in a media conference coinciding with the release of the MAS annual report on July 19, MAS managing  director Ravi Menon clarifies:  “In reality, these so-called ‘Singapore-based’ crypto firms have little to do with crypto-related regulation in Singapore.”

Menon cites several companies, which have recently run into difficulties as cryptocurrency prices plunged:

• TerraForm Labs and Luna Foundation Guard are not licensed or regulated by MAS, nor have they applied for any licence or sought exemption from holding any licence.
• Three Arrows Capital was not regulated under the Payment Services Act. It had operated under the registered fund management regime to carry out limited fund management business, but had ceased to manage funds in Singapore prior to the problems leading to its insolvency.
• Vauld is currently not licensed by MAS nor has it sought any exemption from holding a licence under the Payment Services Act. It has submitted a licence application, which is pending review.

Not suitable for public

Data from MAS show that the regulator has been stringent in granting licences to crypto companies. Binance, once considered the world’s largest crypto exchange, started winding down operations in Singapore last December. In January 2022, the MAS issued a circular prohibiting crypto providers from marketing their services in public areas. 

“MAS stresses that DPT service providers should conduct themselves with the understanding that trading of DPTs is not suitable for the general public,” according to the regulator. “These guidelines set out MAS’ expectation that DPT service providers should not promote their DPT services to the general public in Singapore.”

MAS refers to cryptocurrencies as digital payment tokens, and entities dealing in crypto are called DPT service providers.

While Shanmugaratnam did not give a timeline on when possible new regulations that will limit the public’s ability to buy or sell crypto will kick in, he admits that the borderless nature of cryptocurrency markets necessitates regulatory coordination and cooperation globally. 

“These issues are being discussed at various international standard-setting bodies where MAS actively participates,” he adds. 

Shanmugaratnam also reiterates a warning to the public that cryptocurrencies are highly risky and are not suitable for general investments. 

“People can lose most of the money they have invested, or more if they borrow to purchase cryptocurrencies,” he says. 

Long-standing warning

In his remarks, Menon notes that the crypto industry globally is still evolving and regulation is still catching up with industry trends

“Singapore is often seen as being at the forefront, with a clear licensing and regulatory framework. But the focus of crypto regulation to-date in Singapore, as well as in most major jurisdictions, has been on containing money laundering and terrorist financing risks,” he says.

“Most regulatory regimes today do not cover areas such as consumer protection, market conduct, and reserve backing for stablecoins. This is changing.  Reviews and public consultations are underway, among international standard-setting bodies and regulators, to strengthen regulation in these areas.”

Menon stresses that the key lesson from the current upheaval in the global crypto industry is that investing in cryptocurrencies is highly risky. “This is what MAS has been warning the public about for the past five years,” he says.