The proposal stated, “Cryptocurrencies can be highly volatile as their prices are typically not related to any economic fundamentals and are hence highly risky and not suitable for consumers.”
Singapore wants to tighten the rules governing digital assets in the country. One of its recent moves to achieve this aim is a proposed ban on retail investors from borrowing to fund crypto purchases.
A Monetary Authority of Singapore consultation paper noted other proposed actions. They also want to ban companies from using tokens deposited by retail investors for lending or staking to generate returns.
The paper threw more light on the volatility and risks connected to cryptocurrencies.
According to the proposal:
“Cryptocurrencies can be highly volatile as their prices are typically not related to any economic fundamentals and are hence highly risky and not suitable for consumers.”
They further stated that purchasing virtual coins with credit cards or other forms of credit should not be permitted for the retail sector.
The paper also dictates stablecoins would need to be fully backed by reserve assets of the same denomination. They will be pegged to the local dollar or a Group of 10 currency. Issuers would also have to meet minimum capital standards.
In the wake of a $2 trillion digital asset selloff that destroyed the TerraUSD algorithmic stablecoin, Singapore has seen a string of cryptocurrency explosions. Regulators worldwide are contemplating how to safeguard consumers while utilizing cryptocurrency’s innovation.
Singapore had already taken certain actions before the consultation. It is currently restricting cryptocurrency marketing. Virtual asset providers must also obtain a local license, even if they only carry out business abroad.
However, the country’s central bank noted that it rejected the outright banning of cryptocurrency services for retail customers. It says such measures would drive customers to unlicensed platforms.
