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Cryptocurrency Regulation Tightens in Singapore Amid Global Crackdown
Singapore, 21 December 2022 - The Monetary Authority of Singapore (MAS) has taken significant steps to curb the risks associated with cryptocurrency trading and investments, introducing measures aimed at reducing consumer harm and promoting responsible business practices.
Background
In recent years, the MAS has issued several warnings cautioning consumers about the high-risk nature of virtual currency transactions. In August 2017, it clarified that initial coin offerings (ICOs) must comply with securities laws if a token is structured as a security. The authority also advised consumers to exercise due diligence when investing in digital tokens.
Recent Developments
Despite these efforts, cryptocurrency prices have continued to fluctuate wildly, and the industry has been plagued by scandals and collapses of major players. In response, the MAS introduced measures in January 2022 to restrict marketing and advertising of cryptocurrency services and prohibit trivialization of risks.
New Proposals
The latest development comes with two consultation papers released on October 26, 2022, outlining proposed regulations aimed at reducing consumer harm and promoting responsible business practices. The proposals include:
- Restrictions on digital payment token service providers (DPTSPs) offering incentives to retail customers
- Prohibition of leveraged DPT transactions
- Regulation of stablecoins issued in Singapore, requiring issuers to hold reserve assets equivalent to at least 100% of outstanding tokens and maintain a minimum base capital of SGD 1 million or 50% of annual operating expenses
Global Developments
The global cryptocurrency market is also undergoing significant changes. The European Union’s proposed Markets in Crypto-Assets (MiCA) regulation and Transfer of Funds (TFR) regulation are set to come into effect from 2023.
- Under MiCA, crypto-asset firms will be subject to supervision by national authorities
- TFR aims to prevent money laundering and terrorism financing by tracing crypto assets and imposing stricter checks on transfers
Impact
The changes are expected to have a significant impact on the industry, with some critics warning of difficulties in complying with the new regulations.
Conclusion
The Regulatory and Investigations team at Clyde & Co will continue to monitor developments in cryptocurrency regulation and provide guidance to clients affected by these changes.