Singapore crypto players say final rules seek to strike a balance but fears linger

SINGAPORE – The final measures governing the cryptocurrency sector here sought to balance the need for retail investor safeguards with companies’ worries, market observers said, noting that even as the regulator stood firm on certain aspects, it made adjustments too.

The comments come after the Monetary Authority of Singapore on Nov 23 unveiled the last tranche of finalised crypto rules for digital payment token (DPT) service providers in Singapore. The measures, to be rolled out in phases from mid-2024, prohibit DPT service providers from offering credit facilities to retail investors to buy or hold crypto, among others.

Ms Angela Ang, senior policy adviser for blockchain intelligence firm TRM Labs in Singapore, said MAS had held its ground on some unpopular measures like not allowing Singapore credit card payments by local retail investors, while giving more latitude in other areas such as the treatment of crypto holdings in calculating the accredited investor threshold.

An accredited investor is someone with at least $2 million in net personal assets.

Under the rules, MAS will recognise no more than 50 per cent of the value of DPT holdings a person has, or up to $200,000, whichever is lower, when determining if an individual is eligible as an accredited investor. Previously, DPT holdings were not recognised.

Mr Lasanka Perera, chief executive of exchange Independent Reserve Singapore, said the inclusion of DPTs in determining an investor’s net worth as an accredited investor will have a positive impact on the traditional finance markets governed under the Securities and Futures Act.

He said the move will pave the way for DPTs to be progressively integrated into traditional financial systems, and in turn, encourage a wider adoption of digital assets.

While market players generally supported the moves, concerns that the rules could make players here less competitive than those overseas lingered.

Mr Gerry Eng, chief technology officer at exchange Coinhako, said the new measures should ultimately reduce excessive cryptocurrency speculation by retail customers.

But he said it is vital to ensure that customers who wish to access DPT services are not impeded. “To that extent, we think some of the measures being put in place could be refined to ensure that licensed and regulated entities based in Singapore could remain competitive on a global scale.”

Ms Angela Ang said MAS had held its ground on some unpopular measures while giving more latitude in other areas. PHOTO: TRM LABS

Singapore Fintech Association president Shadab Taiyabi said the rules will give consumers and businesses greater clarity.

He said the digital assets economy has a global impact and the association remains steadfast in reinforcing Singapore’s position as a competitive and sustainable market.

“It is important for Singapore to continue striking a balance through purposeful regulation, championing responsible innovation, and upholding the foundations of consumer protection and market integrity.”

Mr Lim Tung Li, senior policy adviser for the Asia-Pacific region at blockchain analysis firm Elliptic, said MAS’ position may seem stringent compared with Hong Kong’s new licensing regime for virtual asset trading platforms (VATPs), but the territory’s Securities and Futures Commission (SFC) has restrictions similar to Singapore’s.

For instance, VATPs are not to offer investors any gift, other than a fee or charge discount, to customers for virtual asset trading. They are also not to conduct activities related to virtual asset futures contracts or related derivatives.

And while SFC has published token admission criteria that must be fulfilled before any virtual asset could be listed and traded by retail customers, MAS has chosen not to do so, Mr Lim said.

Instead, he said MAS adopted a disclosure-based approach where crypto service providers are ultimately responsible for the DPTs made available for trading.

“It can be argued that while both places are focused on investor protection, the differences in the relative maturity of the two jurisdictions with respect to crypto regulation has led to a divergence in the implementation of specific guardrails for the retail customer,” said Mr Lim.

TRM Labs’ Ms Ang said that MAS’ disclosure-based approach to token listing gives service providers more flexibility to set out their own approaches, compared with Hong Kong’s more prescriptive method.

Among the finalised rules is for crypto service providers to assess a retail client’s awareness of the risks.

To this end, an industry-wide standard assessment to gauge retail customers’ risk awareness is being worked out by market players.

Coinhako’s Mr Eng said an industry-wide standard assessment will be helpful for customers, but each firm should evaluate if there are additional or specific risks unique to the products or services it offers.

Independent Reserve’s Mr Perera said the exchange is collaborating with industry associations on the assessment, but he believes a flexible risk assessment approach will allow market players to customise their customer categorisation process.