Singapore Monetary Authority Plans to Ban Crypto Credits, But Why?
The plans to add crypto to credit cards impressed the community. With such add-ons, users can access credit facilities in crypto for payments or other activities. A credit card is one of the fastest ways to access money for payments. Many countries operate a cashless economy where debit and credit cards rule.
But according to a new report, the Singaporean Monetary Authority aims to stop such opportunities. The reason behind the decision is the crash of Three Arrows Capital, or 3AC, as it is popularly called. The Singapore-based crypto hedge fund filed for bankruptcy, causing terrible losses and many negative events.
Singapore central bank releases two papers on crypto regulation
The bank released two consultation papers on its plan to better regulate crypto. The papers propose how DPTSPs (Digital Payment Token Service Providers) and stablecoin issuers should operate under the “Payment Services Act.”
The bank published the papers to reduce the consumer’s risk in engaging in crypto trading. The documents also aim to improve the way stablecoin transactions take place.
The first paper contains the bank’s proposal to guide how DPT services and other services involving top coins, such as BTC, XRP and Ether, work. The guideline reiterates that utilization or credit facilities in DPT trading will lead to greater losses than the user’s investment.
So section 3.20 of the paper shows MAS’s proposal to ban DPTSPs from offering credit facilities to retail customers in crypto and fiat. Also, MAS insists that crypto service providers stop accepting credit card deposits in exchange for their services.
More importantly, MAS suggests that DPTSPs should keep their clients’ assets separate from theirs. Thus, they can keep these assets for their customers instead of repeating the mistake of 3AC in June.
However, if the providers do not want to keep the assets separate, they can conduct tests to identify the level of knowledge their customers have about crypto investment risks.
Provisions in the second paper
The second article focused on stablecoin issuers in Singapore. It outlined some requirements they must meet to operate in the country.
Section 4.21 of the paper MAS proposes that issuers should stop lending or staking stablecoins linked to a single currency (SCS) and lend other cryptoassets.
Another important proposal is to mandate a minimum capital base of $1 million or 50% of the SCS issuer’s annual operating costs. MAS stated that SCS should always hold this capital, including liquid assets.
After releasing the papers, MAS has opened for comments until 21 December 2022. So the Singaporean crypto community can react to the proposals.
The latest development may not sit well with many operators. But MAS aims to protect investors’ interests and capital due to the recent trend of crashes, liquidations and losses.
Featured image from EyeEm, Chart: TradingView.com
