Recently, the Monetary Authority of Singapore has proposed several new regulations to tighten restrictions on cryptocurrencies and the usage of crypto. This move follows the crackdown on Cryptocurrencies in China last year and after a few high-profile crypto companies based in Singapore closed, causing issues for local retail users. Singapore was also hit by the fallout of the scandal surrounding the collapse of the crypto-exchange platform FTX, run by Sam Bankman-Fried.
The industry had experienced incredible growth in the region, largely as a direct result of the crackdown on Crypto companies in China. Largely thanks to Singapore's progressive stance towards Crypto, payment networks, crypto funds, and crypto lenders. The boom has created incredible opportunities for the island nation but is now seeking to roll back some of the previous regulations.
Risk Focused Regulations
The nation's monetary authority has advised that they are adopting a risk-focused approach to digital assets, minimizing the risks regarding digital assets, while still facilitating innovation in the area. The MAS noted that regulation needed to be clear and proportionate in response to the risks they face.
The group also outlined that the regulations must be reviewed on a periodical basis, to make sure that the recommended regulations are not overstepping the mark and imposing too great a sanction on the crypto market. The regulations also need to be reviewed to make sure that they continue to be relevant and keep pace with technological innovations.
The MAS also advised several regulations on what digital payment token service providers, or DPTSPs, can do with digital payment tokens. The MAS proposed regulations to ban DPTSPs from charging, pledging, or hypothecating using customers' DPTs. The MAS also strictly advised against mortgaging DPTs.
The concept behind regulations is to mitigate the risks behind trading on exchanges. Leveraging DPTs can help customers and exchanges maximize potential profits but it also comes with additional risks if the market suffers a downturn.
On October 26th, the MAS also announced recommended regulations for Stablecoins, including the creation of stablecoins connected to the Singapore dollar, or currencies from Group of Ten countries, including the dollar, pound, and euro.
While traders may be worried that Crypto's future in Singapore policy could follow China's example. The Managing Director of the Central Bank of Singapore has stood by Crypto stating that the bank has no plans to ban crypto and instead institute smart regulations.
As stated by Ravi Menon, banning cryptocurrency will not work, as crypto is borderless and the future of the coins is inevitable. However, it is still important that the regulations do not overstep their bounds and curtain the innovation that has come about through technologies innovated on the blockchain.
The country must also be wary of over-regulating the industry that has already brought significant benefits to the country. The fact that the regulations will be written in conjunction with members of the industry, which should help the authorities navigate some of the bigger issues, and the fact that they are committed to reviewing regulations in a timely manner, suggests a serious commitment to making sure that the regulations will be effective in protecting the consumer without strangling innovation.