Singapore struggles to curb cryptocurrency enthusiasm

City-state can’t beat them, so plans to regulate them, starting with consumer suitability tests

The Monetary Authority of Singapore (MAS) said on Monday it is taking measures to reduce the harms caused by cryptocurrency, including conducting "customer suitability tests" as part of its ongoing slow-motion crackdown on the alternative tender.

Speaking at a fintech and digital economy event, MAS managing director Ravi Menon acknowledged that despite issuing regular warnings and measures against retail use of cryptocurrency, consumers were still engaging in it, both globally and locally, seemingly "irrationally oblivious" to its risks.

"Banning retail access to cryptocurrencies is not likely to work," said Menon. "The cryptocurrency world is borderless. With just a mobile phone, Singaporeans have access to any number of crypto exchanges in the world and can buy or sell any number of cryptocurrencies."

"MAS is therefore considering further measures to reduce consumer harm," Menon added. He said these measures were meant to add friction to retail access. In addition to customer suitability tests, the new system would include restricting the use of credit and other forms of leverage available for crypto trading.

The bank authority was less down about stablecoins – saying they held good potential if "securely backed by high quality reserves and well regulated." MAS said it would propose a regulatory approach to stablecoins by October. And it was generally supportive of wholesale central bank digital currencies (CBDCs), although only tolerant of retail CBDCs.

"MAS does not see a compelling case for retail CBDCs in Singapore," said Menon, adding: "Nevertheless, MAS is building the technology infrastructure that would permit issuance of retail CBDCs should conditions change." MAS is also working with other regulators to design a framework for banks' exposure to digital assets.

"The most promising use cases of digital assets in financial services are in cross-border payment and settlement, trade finance, and pre- and post-trade capital market activities," said Menon.

In April, MAS said in a bill explanatory brief that all digital token transactions carry higher inherent risks.

MAS board member and minister of state Alvin Tan explained in parliament that there was concern that Singapore's reputation could be at risk if digital transaction service providers rooted their business in Singapore, even if they did not provide services there.

The country therefore passed the Financial Services and Markets Bill 2022 giving lawmakers the power to deny licenses to operators the country deems unfit. Singapore has only granted around two dozen crypto payment licenses so far, despite having around 180 would-be licensees apply in 2020.

The rhetoric has intensified over time, with MAS chief fintech officer Sopnendu Mohanty warning in June that the city-state would be "brutal and unrelentingly hard" on crypto players exhibiting bad behavior. ®

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