The Monetary Authority of Singapore (MAS) published two consultation papers on Wednesday, proposing new regulatory rules around cryptocurrency trading and circulation of stablecoins.
The proposed rules focus on minimizing the risks of cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term to which retail investors are exposed.
“MAS is concerned that retail customers may not have the financial wherewithal to withstand large losses that are likely to ensue from speculative trading of markets that they do not fully understand,” one of the consultation papers stated.
If implemented, the rules would prohibit cryptocurrency lending services to retail investors. Further, businesses need to segregate customer assets from their own assets.
Singapore will not allow companies to offer incentives for acquiring crypto customers. Also, businesses in Singapore cannot accept credit cards for selling cryptocurrencies or provide financing options to retail traders.
Additionally, the proposal might need companies to test the financial knowledge of retail customers. However, these requirements would not apply to AI-based trading systems or institutional investors.
Making Stablecoins Safe
The focus of the regulator is on stablecoins. While stablecoins pegged to are not volatile like other cryptocurrencies, the collapse of Terraform Labs exposed the sector’s vulnerabilities.
MAS now wants issuers of single currency-pegged stablecoins with a circulation value of more than SG$5 million to hold reserves in cash, cash equivalents, or short-dated sovereign debt securities of at least 100 percent of the circulation value. On top of that, the holding assets should be denominated in the same currency as the pegged currency. Moreover, there will be a minimum base capital requirement of SG$1 million or six-month operating expenses.
Companies in Singapore can only issue stablecoins pegged to the Singapore dollar or any other G10 currencies.
Singapore is home to several prominent crypto startups. MAS has stringent registration rules and is now regulating 18 crypto companies, including Blockchain.com and Coinbase. Binance, on the other hand, has shuttered its Singapore operations.
“Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” MAS said.
The Monetary Authority of Singapore (MAS) published two consultation papers on Wednesday, proposing new regulatory rules around cryptocurrency trading and circulation of stablecoins.
The proposed rules focus on minimizing the risks of cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term to which retail investors are exposed.
“MAS is concerned that retail customers may not have the financial wherewithal to withstand large losses that are likely to ensue from speculative trading of markets that they do not fully understand,” one of the consultation papers stated.
If implemented, the rules would prohibit cryptocurrency lending services to retail investors. Further, businesses need to segregate customer assets from their own assets.
Singapore will not allow companies to offer incentives for acquiring crypto customers. Also, businesses in Singapore cannot accept credit cards for selling cryptocurrencies or provide financing options to retail traders.
Additionally, the proposal might need companies to test the financial knowledge of retail customers. However, these requirements would not apply to AI-based trading systems or institutional investors.
Making Stablecoins Safe
The focus of the regulator is on stablecoins. While stablecoins pegged to are not volatile like other cryptocurrencies, the collapse of Terraform Labs exposed the sector’s vulnerabilities.
MAS now wants issuers of single currency-pegged stablecoins with a circulation value of more than SG$5 million to hold reserves in cash, cash equivalents, or short-dated sovereign debt securities of at least 100 percent of the circulation value. On top of that, the holding assets should be denominated in the same currency as the pegged currency. Moreover, there will be a minimum base capital requirement of SG$1 million or six-month operating expenses.
Companies in Singapore can only issue stablecoins pegged to the Singapore dollar or any other G10 currencies.
Singapore is home to several prominent crypto startups. MAS has stringent registration rules and is now regulating 18 crypto companies, including Blockchain.com and Coinbase. Binance, on the other hand, has shuttered its Singapore operations.
“Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” MAS said.
Picture credit score: Felipe Torres, Equinor.
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