MAS mulls regulating trade of payment token derivatives

THE Monetary Authority of Singapore (MAS) is seeking to allow derivatives of payment tokens such as Bitcoin and Ether to be traded on approved exchanges in Singapore, it said in a consultation paper on Wednesday.

Approved exchanges include Singapore Exchange Derivatives (SGX Derivatives), Asia-Pacific Exchange (APEX) and Ice Futures. MAS will be regulating the activity under the Securities and Futures Act.

This is to introduce a regulated product for institutional investors to gain and hedge their exposure to the payment tokens.

However, MAS still does not view payment token derivatives to be suitable for retail investors to trade, it said in a press release.

These tokens tend to have little or no intrinsic value, are difficult to value and exhibit high price volatility, said MAS, adding that retail investors could lose the whole amount they put in and more.

Retail investors will also need to fork out more to trade in these derivatives. Come June 30 next year, retail investors will need to pay 1.5x the standard amount of margin required for contracts offered by the approved exchanges, subject to a floor of 50 per cent.

For example, assuming a contract size of one Bitcoin, with notional value of S$10,000. If the margin required for payment token derivatives by the exchange is fixed at 40 per cent of the contract size, retail investors will need to pay S$6,000 instead of the S$4,000 institutional investors pay. However, the margin is still subject to a 50 per cent floor. This means that even as margin fees by the approved exchanges are reduced, retail investors will still have to pay at least 50 per cent of the margin fee, whichever is higher.

Interested parties can submit their comments on the proposed regulation of payment token derivatives on approved exchanges to capital_markets@mas.gov.sg by Dec 20.