Regulation of Cryptocurrency Derivative Market in the Republic of Singapore

According to the recent statement released by the MAS, Singapore’s main financial regulator, the organization will be overseeing contracts in which payment tokens will be used as underlying assets. The supervisor will be also regulating payment tokens in Singapore offered to investors through approved (i.e. regulated) exchanges. 

Let’s take a closer look at how Singapore’ derivatives market is regulated & how it can affect the registration of cryptocurrency companies in Singapore.

It is extremely important for MAS to exercise control over digital products traded on regulated exchanges. Therefore, cryptocurrency derivatives aren’t offered through MAS-approved exchanges (which also includes foreign exchanges). Conducting derivative transactions in Singapore isn’t prohibited but it isn’t regulated by MAS, either.

Payment Tokenization

Being digital representation of value, the payment token must meet the below criteria:

• have expression in units of measure;
• must have no fixed value established by the issuer on an ongoing basis;
• is or will be a medium for payment for services/goods or debt repayment;
• may be electronically sold, stored & transmitted.

Registering a Cryptocurrency Company in the Republic of Singapore

MAS keeps reiterating its belief that cryptocurrency derivatives aren’t suitable for the majority of retail investors. It is expected, that the financial regulator will initiate the following measures in the near future:

• The requirement to impose more penalties on individuals or companies investing in token derivatives that are traded on exchanges approved by MAS
• Suggesting that retail investors refrain from dealing with non-regulated organizations. Should they choose to do business with non-regulated exchanges, they won’t be guaranteed regulatory protection and do so at their peril.
• Intensification of efforts to educate consumers (for example, through MoneySENSE) in order to alert investors to the risks involved in the trade in payment tokens & dealing with unregulated organizations.

Regulation of Crypto Assets in Singapore

According to MAS, there will be no required minimum amount for investors seeking to work with derivatives referencing payment tokens. Proposals to make it obligatory for investors to engage in trading activities on a prepayment basis or prohibit them from trading in products like these were excessively harsh.

In line with its policy of non-approval of particular products, MAS isn’t going to be publishing lists of regulated cryptocurrency derivatives. Therefore, stakeholders will be deciding for themselves whether what they are involved in falls within the scope of regulation & whether they comply with respective regulations.

Conclusion

MAS will be continuing to assess the effectiveness of the said measures & effectiveness of other measures proposed by the parties involved in the process of consultations. MAS is also expected to be publishing its response to the feedback obtained in connection with regulating the use of electronic currencies & digital payment tokens.