The Monetary Authority of Singapore (MAS) presents proposals to increase the cryptocurrency industry following the bankruptcy of Singapore’s cryptocurrency hedge fund Three Arrows Capital (3AC).
The Central Bank of Singapore has published two consultation documents on proposals for the operations of virtual payment token service providers (DPTSP) and stablecoin issuers under the Payment Services Act.
Published Oct. 26, the two consultation documents aim to reduce risks for consumers similar to cryptocurrency trading and criteria for stablecoin transactions.
The first document includes proposals for virtual payment token (DPT) or similar to primary cryptocurrencies such as Bitcoin (BTC), Ether (ETH) or XRP (XRP).
According to the authority, “any form of credit or leverage in TPD trading” would result in an “amplification of losses,” which could lead to losses greater than a client’s investment.
In segment 3. 20, the MAS proposed prohibiting DPTSP from offering retail consumers “any credit facility,” whether in the form of fiat currencies or cryptocurrencies. According to the regulator, cryptocurrency service providers will also not be able to settle deposits made through credits. card in exchange for cryptographic services.
“MAS proposes that DPTSP segregate consumer assets from DPTSP’s own assets and hold them for consumer advantage,” the central bank noted, referring to the recent bankruptcy of several cryptocurrency companies, adding the bankruptcy of 3AC in June.
Aside from that, DSS also reported that DPTSP deserves to adopt customer testing to assess retail customers’ knowledge of crypto-related dangers.
The current consultation document provides proposals for a regulation of sound currencies in Singapore, offering a set of commercial and operational needs for sound coin issuers.
In segment 4. 21 of the document, MAS proposed to prevent stablecoin issuers from lending or wagering unmatched coin (SCS) stablecoins, as well as lending or trading with other cryptocurrencies.
“This is the final and mitigating threat to the SCS issuer of a comprehensive threat-based capital regime. Such activities can still be carried out from other similar entities,” the consultation document says.
The regulator also proposed introducing a minimum capital base of $1 million or 50% of the SCS issuer’s annual operating expenses. Capital will need to be held at all times and come with cash, MAS added.
Related: Mega-rich Hong Kong and Singapore consider crypto investments: KPMG
The regulator invited interested parties to submit comments on the proposals until December 21, 2022.
As previously stated, the crypto winter of 2022 has become particularly damaging for cryptocurrency lenders, as many of these companies have been unable to pay their bonds due to a large drop in the market. Some Bitcoin analysts are convinced that crypto lending can still this bear market, but they want to deal with similar problems to short-term assets and liabilities.