Singapore Regulator May Limit Retail Participation in Crypto

Tharman Shanmugaratnam – leading Minister of the Monetary Authority of Singapore (MAS) – says the regulator may restrict retail investment in the crypto sector through new consumer protection safeguards. These could include limits on leverage trading – a trading strategy that’s caused numerous crypto traders and firms to go bust in recent weeks.

Crypto: Unsuitable for Retail

The minister’s statement on Monday was in response to Murali Pillai, an MP representing Singapore’s right-leaning People’s Action Party. The politician asked whether MAS had plans to place greater restrictions on crypto trading platforms to protect “unsophisticated persons” from entering “highly risky” crypto trades.

The minister reiterated the MAS’s view that cryptocurrencies are “not suitable investments for the retail public,” due to their exceptional price volatility. “Recent events have vividly demonstrated the risks, with prices of several cryptocurrencies falling drastically,” he added.

Last month, Bitcoin and other cryptocurrencies plummeted to lows unseen since the crypto market top in 2017. Market panic was largely spurred by an ongoing threat of hawkish central bank policy, with rising inflation only motivating the Fed to hasten its interest rate hikes.

The collapsing market, combined with Terra’s downfall in May, has kicked off a domino effect of failing crypto institutions struggling to stay solvent. Numerous trading and lending platforms, such as Celsius, have been forced to freeze customer withdrawals as they fight to pay down crypto-collateralized debt.

With similar events in mind, MAS is now considering both “limits on retail participation,” and “rules on the use of leverage,” when trading cryptocurrencies. However, given the borderless nature of the asset class, it recognizes that global cooperation and coordination will be required for such restrictions to be effective.

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

Singapore’s Regulatory Progress

In January, MAS placed restrictions on public advertising of cryptocurrencies which sought to “trivialize” its risks. It was also one of many jurisdictions to ramp up its anti-money laundering and terrorist financing measures applying to digital assets in April.

That said, the authority has clearly stated that it has no intention to implement any blanket bans on crypto transactions. In an interview last year, the MAS managing director acknowledged that crypto could “lead to a very good outcome for the economy and society.”

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