Singapore Central Bank Seeks Feedback on Crypto Leverage Ban

The central bank of Singapore is ready to receive commentary on its proposed crypto measures, which include strict rules on stablecoins


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key takeaways

  • One proposal seeks to stop retail investors from buying crypto with credit cards and trading with leverage
  • Stablecoin issuers would also be required to enhance anti-money laundering and terror financing controls

The Monetary Authority of Singapore (MAS), the nation’s central bank, is seeking public feedback on proposed measures to ramp up crypto and stablecoin policy in the wake of Terra’s spectacular collapse.

In two consultation papers published Wednesday, MAS is requesting feedback on a range of issues relating to digital assets. It’s the biggest set of proposals the country has conceived since 2019.

MAS, which doubles as Singapore’s primary financial regulator, is pitching a number of restrictions on digital payment token service providers, namely exchanges, including barring them from offering incentives to retail customers.

That move would bolster existing regulations put in place at the beginning of this year, when MAS banned service providers from advertising or promoting to the public via any means except their own websites.

MAS is also seeking comments on proposed restrictions on debt-financed and leveraged crypto transactions in a move that would prohibit providers from accepting credit cards. The bank is even floating an outright ban on leveraged trading for retail customers.

Effective measures to safeguard the private keys and storage of customers’ crypto are being explored with emphasis ensuring that just any one staff has access to client funds. 

Singapore’s regulatory tightening follows the saga of now-insolvent crypto hedge fund firm Three Arrows Capital, which was headquartered in the island city-state. 

It was revealed earlier this year that some of the industry’s largest lenders, including Celsius Network and Voyager Digital, had exposure to the fund as it suffered from its own poor investment decisions, including in the imploded Terra ecosystem.

As such, MAS is proposing providers implement appropriate risk management controls and segregate customers’ assets in the case of insolvency and hardship for certain businesses. 

The appointment of an independent custodian for all service providers will also be debated during a four-week period, starting from now.

Singapore central bank could boost local crypto credibility

In an accompanying stablecoin consultation paper, MAS is seeking to increase its powers over single currency-pegged stablecoins (SCS) issued by companies registered within its borders.

MAS intends to carve out a separate category to cater for SCS issuers under the state’s Payment Services Act, requiring licenses for issuers whose token exceeds $5 million.

The rules wouldn’t necessarily apply to the largest stablecoin companies in the crypto space, such as Tether and Circle, as both companies are registered outside Singapore.

The most prominent stablecoin pegged to the Singaporean dollar, XSGD, commands a market capitalization below $53 million, while both Tether and Circle together oversee more than $110 billion in circulating supply.

MAS is fielding comments on whether there could be grounds to extend its regulatory reach to stablecoins issued elsewhere, although it’s unclear exactly what that would look like.

In any case, regulated SCS issuers within Singapore will be required to meet existing money laundering and terrorist financing requirements, as well as technology and cyber risk management currently applicable to all regulated payment service providers.

Additionally, the regulator wants regulated banking entities to have enough legal runway to issue their own stablecoins. MAS is further eyeing rules to bolster stablecoin reserve asset treasuries for both institutions and non-bank issuers.

“The additional regulations on stablecoins help to create credibility for a volatile asset class, and currency-based tokens should come under a higher standard given that they have much broader applications for payments,” Chen Zhuling, CEO of Singapore-based staking solutions firm RockX, told Blockworks in an email.

Public feedback on the two proposals is being sought until Dec. 21 of this year. A definitive timeframe has not yet been established on when the measures would be implemented.

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