MAS may resort to suitability tests, leverage restrictions to tame crypto exuberance: Ravi Menon
Tan Nai Lun
The Monetary Authority of Singapore (MAS) will take further action, which may include introducing customer suitability tests and restricting the use of leverage and credit facilities, to reduce consumer harm arising from cryptocurrency trading.
MAS is promoting Singapore as a hub for crypto innovation and digital asset use cases. But it views cryptocurrencies as “highly hazardous for retail investors”, said Ravi Menon, managing director of MAS, on Monday (Aug 29).
“(Consumers) seem to be irrationally oblivious about the risks of cryptocurrency trading,” Menon said at a seminar on the digital asset ecosystem in Singapore.
The MAS will publicly consult on the proposals for regulations to protect consumer interests and on stablecoins by October this year.
Since January, MAS has already tightened curbs on cryptocurrency trading, such as by restricting marketing and advertising of cryptocurrency services by cryptocurrency platforms and removing cryptocurrency ATMs from public areas.
But Menon noted that surveys show that consumers are still trading cryptocurrencies.
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Cryptocurrencies are useful within a blockchain network, as they reward participants who help to validate and maintain transaction records.
“But outside the blockchain network, cryptocurrencies do not serve a useful function – except, unfortunately in many cases, as a vehicle for speculation,” Menon said.
He noted that given the borderless nature of cryptocurrencies, banning retail access is unlikely to work.
MAS does not see a compelling case for the retail use of central bank digital currencies (CBDCs), as Singapore has well-functioning payment systems and broad financial inclusion.
It is, however, building technology infrastructure that would allow CBDCs to be issued to the public should conditions change, Menon said.
Meanwhile, MAS does see good potential for stablecoins, whose values are tied to another asset such as the US dollar, if they are securely backed by high quality reserves and are well-regulated.
It also sees good potential for wholesale CBDCs, especially in areas including cross-border payments and settlements, which are slow, expensive and opaque today, Menon said.
He noted that holders of the wholesale CBDCs – which are restricted for use by financial institutions – will also have a direct claim on the central bank that issues the CBDCs, as they are the direct liability of a central bank.
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