Authorities in the Asian city state are claiming cryptocurrencies “have failed the test of digital money”.
With FTX founder Sam Bankman-Fried facing the prospect of spending the next several decades in prison (he will be formally sentenced in March), lawsuits being filed in hundreds of courts in dozens of territories, and investigations being initiated by global regulators and criminal-prosecution authorities, those who are old enough to remember the dot-com boom and bust of the late 20th and early 21st centuries will find the chaos surrounding cryptocurrencies and exchanges both familiar and dispiriting – but also entirely predictable. When a poorly regulated market involving colossal sums of often untraceable money hits boom time, financial malfeasance is seldom far behind.
It is against this shambolic backdrop that Singapore is planning to impose stricter regulations on cryptocurrency service providers in a move aimed at protecting retail customers from the risks and harms associated with trading crypto assets. Yesterday (23 November) the Monetary Authority of Singapore (MAS), the country’s financial regulator, said in a statement that it will introduce new measures to regulate the business conduct and consumer access of crypto service providers, also known as digital payment token (DPT) service providers.
The measures will include prohibiting DPT service providers from accepting locally issued credit-card payments, offering incentives to trade in cryptocurrencies and providing financing, margin or leverage transactions for retail customers. These restrictions are intended to limit the exposure and leverage of retail customers to the highly volatile and speculative crypto market.
The regulator will also issue rules pertaining to business conduct, such as requiring DPT service providers to publish policies, procedures and criteria that govern the listing of a digital payment token and establish effective procedures to handle customer complaints and resolve disputes.
“DPT service providers have the obligation to safeguard the interests of consumers who interact with their platforms and use their services,” said Ho Hern Shin, deputy managing director of financial supervision at the MAS.
“While these business’s conduct and consumer access measures can help meet this objective,” continued Ho, “they cannot insulate customers from losses associated with the inherently speculative and highly risky nature of cryptocurrency trading.”
Ho added: “We urge consumers to remain vigilant and exercise utmost caution when dealing in digital payment token services, and to not deal with unregulated entities, including those based overseas.”
The MAS has confirmed that these new measures will take effect in phases from mid-2024. The regulator will also consult on further measures to enhance the anti-money laundering and counter-terrorism financing regime for DPT service providers.
Singapore has been one of the more progressive jurisdictions in regulating the crypto industry, having introduced a framework for licensing and supervising DPT service providers under the Payment Services Act, which came into force in January 2020.
Since then, the regulator has stepped up its oversight and enforcement actions on crypto firms, especially those that target retail customers. In July, it ordered firms to safeguard customer assets under a statutory trust before the end of the year. MAS also restricts firms from facilitating lending or staking of their retail customers’ assets.
In January 2022, Singapore banned crypto service providers from promoting their services in public areas or through third parties such as social media influencers. Crypto service providers can only market or advertise on their own corporate websites, mobile apps or official social media accounts.
At the Singapore FinTech Festival 2023 last week, MAS managing director Ravi Menon said that cryptocurrencies “have failed the test of digital money”, adding: “They have performed poorly as a medium of exchange or store of value. The prices are subject to sharp speculative swings. Many investors in these cryptocurrencies have suffered significant losses.”
Singapore’s move to tighten crypto rules comes amid a global regulatory crackdown on the crypto industry, as authorities around the world grapple with the challenges and opportunities posed by the sector. In the UK, the Financial Conduct Authority (FCA) has set rules for crypto businesses providing services with digital tokens to be approved and register for anti-money laundering regulations, while the government has announced its intention to strengthen the rules for crypto trading platforms and to create a robust regulatory regime.
The EU has also taken steps to regulate the market, and on 16 May this year adopted the Regulation on Markets in Crypto-assets (MiCA), a dedicated and comprehensive Union-wide framework which includes a licensing provision.
Authorities in the US have also made progress, although they lag behind their EU and UK counterparts. The Department of the Treasury and the Internal Revenue Service (IRS) have released proposed regulation on the sale and exchange of digital assets by brokers but no timescale for legislation has been announced to date.
Photo: RDNA.
