Potential crypto investors in Singapore may face risk awareness tests
People looking to trade cryptocurrency in Singapore may soon have to take a test to prove they understand what they’re getting into, the central bank said on Wednesday, as it looks to prevent clueless investors from bankrupting themselves.
The Asian financial hub has taken cautious steps to expand the market for digital assets, but has warned against the risks of trading digital coins, especially among small investors lured by get-rich-quick stories.
“Trading in cryptocurrencies is highly risky and not suitable for the general public,” the Monetary Authority of Singapore (MAS) said as it unveiled proposals to protect traders.
“However, cryptocurrencies play a supporting role in the wider digital asset ecosystem and banning them would not be possible.”
Under the plan, which will face public scrutiny before it can become legislation, MAS will require cryptocurrency service providers to be more transparent in telling consumers about the risks so they can make informed choices.
Potential investors will also have to take a test to assess their understanding of the risks before being allowed to trade, and they will be barred from using credit cards or payment apps to buy the shares.
If an applicant does not answer the questions correctly, service providers can provide them with “training material… to strengthen the customer’s knowledge of the risks… This should not be limited to the questions that the individual customer answered incorrectly”.
Incentives that encourage consumers to invest in crypto are not allowed, and service providers must also adhere to certain standards on how to conduct their business, MAS said.
Chia Hock Lai, co-chairman of the Blockchain Association Singapore, said that while the proposed measures are “comprehensive”, they risk “over-regulating” as some are interconnected.
For example, the risk awareness test should “remove the need to prevent credit card payments and provide incentives to retail customers”, he told AFP.
There has been a global push to regulate the crypto market after wild swings and a series of high-profile collapses, some of which took place in the city-state, hitting its reputation as a potential crypto hub.
In June, Singapore-based cryptocurrency hedge fund Three Arrows Capital collapsed, while Hodlnaut – a crypto lender based in the country – has been placed under interim legal management.
Fugitive South Korean national Do Kwon, founder of cryptocurrency Terra, was also based in the city-state.
Despite the risks, digital currencies continue to attract investors due to reported large gains made over short periods and promotional endorsements encouraging the public to enter the market, MAS said.
Cryptocurrencies are not backed by real assets, which makes them subject to large price fluctuations and trading them is highly speculative.
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