Singapore says retail investors ‘irrationally unaware’ of crypto risks, plans tougher rules

A cryptocurrency ATM from Daenary’s and Co is pictured in Singapore, after the crypto ATM operator in Singapore said it has stopped crypto trading services at its five crypto ATMs to comply with the Monetary Authority of Singapore’s (MAS) new guideline announced on Monday, January. 19, 2022. REUTERS/Edgar Su

SINGAPORE, Aug 29 (Reuters) – Singapore plans to roll out new regulations that will make it harder for retail investors to trade cryptocurrencies at a time when they appear to be “irrationally ignorant” of the risks, the central bank governor said.

Ravi Menon, chief executive of the Monetary Authority of Singapore (MAS), said at an event on Monday that despite warnings and measures, surveys show that consumers are increasingly trading cryptocurrencies globally, not just in Singapore, attracted by the prospect of sharp prices increases.

“They appear to be irrationally ignorant of the risks of cryptocurrency trading,” he said.

“Adding frictions” on retail access to cryptocurrencies was an area MAS was considering, he said.

“These could include customer suitability tests and limiting the use of leverage and credit facilities for cryptocurrency trading,” he added at a seminar titled “Yes to Digital Asset Innovation, No to Cryptocurrency Speculation.”

Singapore’s welcoming approach has helped the financial hub attract digital asset services-related firms from China, India and elsewhere in recent years, making it an important hub in Asia. read more

But recent defaults by some global cryptocurrency-related firms based in Singapore, many of which are not subject to the Financial Conduct Authority’s consumer protection or market conduct guidelines, have sparked concerns about tighter regulation. read more

MAS will seek public feedback on its proposals by October, Menon said, adding that reviews are ongoing by regulators globally.

In January, MAS issued guidelines to restrict cryptocurrency trading service providers from marketing their services to the public. read more

Cryptocurrencies have plunged this year, as US interest rate hikes and ongoing inflation prompt investors to ditch riskier assets.

“MAS’ facilitative stance on digital asset activities and restrictive stance on cryptocurrency speculation are not contradictory,” Menon said.

American crypto exchange Gemini and Huobi, a crypto exchange initially focused on China, are among those with a large presence in Singapore.

Around 180 crypto companies applied for a crypto payment license to MAS in 2020 under a new regime, but Singapore has only handed out about two dozen licenses so far following an extensive due diligence process that is still ongoing.

Reporting by Anshuman Daga and Yantoultra Ngui; Editing by Kanupriya Kapoor and Jacqueline Wong

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