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Singapore Wants to Prohibit Retail From Borrowing Funds for Crypto Investing: Report

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The Monetary Authority of Singapore has proposed to ban retail investors from taking loans for crypto investments. 

Singapore authorities have proposed a new set of regulatory measures to oversee the use of digital assets in the country and protect consumers.

The country’s central bank and financial regulator, the Monetary Authority of Singapore (MAS), recently published two consultation papers containing suggestions to tighten the country’s regulatory stance on digital assets.

MAS Proposes Ban on Crypto Credit

One of the proposals outlined in the consultation paper is to prohibit retail investors from using credit cards or other credit facilities to borrow funds for purchasing or trading cryptocurrencies. 

The MAS also proposed that crypto investors undergo an assessment requiring them to answer a questionnaire to verify whether they understand the potential risks associated with crypto investments. 

These restrictions, however, do not apply to high-net-worth investors who qualify for a broader range of investments. The paper proposed a cap of S$200,000 (approximately $142,000) on digital asset investments for accredited investors.

Due to the volatile nature of cryptocurrencies, the MAS has moved to ban crypto companies from offering such loans, staking, and leveraged transactions. According to the central bank, the instability of prices can cause consumers to incur massive losses.

Additionally, the financial regulator pointed out that crypto service providers should segregate customers’ assets and mitigate consumer complaints by having robust risk disclosures.

“The recent failure of several firms in the DPT industry underscores the importance of DPTSPs having effective and robust arrangements in place for the identification and segregation of customers’ assets,” the paper reads. 

Stablecoins Regulation in Singapore

In a separate consultation paper, the MAS disclosed its plans to regulate the issuance of stablecoins pegged to a single currency (SCS) where the value of the tokens in circulation exceeds S$5 million ($3.6 million).

The paper noted that stablecoins must be pegged to the Singapore dollar or a Group of 10 currency and be fully backed by reserve assets of the same denomination. Additionally, stablecoin issuers must publish a white paper disclosing all crucial details, such as the redemption rights of holders.

No Outright Ban

The proposals come a few months after the country was hit by a series of crypto insolvencies that stemmed from the TerraUSD collapse in May. 

In August, the MAS announced that it intends to establish a stricter regulatory framework to offer crypto investors maximum security amid the volatile market.

However, the country’s central bank clarified that it currently has no plans of placing an outright ban on cryptocurrency services for retail consumers to prevent them from seeking such services on unlicensed platforms.

The consultation period starts today and ends on December 21, during which the regulatory body aims to gather comments from stakeholders regarding the guidelines.

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