SINGAPORE, Nov 24 — From mid-2024, cryptocurrency platforms will not be allowed to offer incentives to people to entice them to trade, while customers will not be able to use Singapore credit cards to buy digital payment tokens, the Monetary Authority of Singapore (MAS) said.

The regulator said on Thursday (Nov 23) that these will be among a slew of regulatory measures to be introduced in phases from the second half of next year, aimed at mitigating potential consumer harm.

The regulations were finalised after a two-month consultation in late 2022.

The measures announced on Thursday were the second set arising from the public consultation. The first set of measures — which among other things focused on making it compulsory to segregate customers’ assets from the company’s assets — were announced in July.

Why it matters

MAS has issued repeated warnings since 2017 that cryptocurrencies are not suitable for retail traders, describing these digital payment tokens as hazardous.

Despite this, the digital currency has continued to attract speculative consumer interest over the years.

The collapse of several cryptocurrencies last year landed a few firms here and overseas in hot water.

Many retail traders also reported great losses, including a couple who saw S$2.3 million wiped out overnight.

MAS in October last year issued a consultation paper outlining several proposed measures to tighten regulation in the cryptocurrency space.

The consultation period closed on Dec 21 last year, and it has since issued its responses to the feedback in two batches, in July and on Thursday.

Ms Ho Hern Shin, its deputy managing director for financial supervision, said that companies have the obligation to protect the interests of consumers who use their services.

Although these measures governing business conduct and consumer access may help meet this objective, they cannot insulate customers from losses “associated with the inherently speculative and highly risky nature of cryptocurrency trading”, she added.

Ms Ho urged consumers to exercise “utmost caution” when dealing in cryptocurrency services and not to deal with unregulated entities, including those based overseas.

TODAY takes a look at some of the measures announced on Thursday.

Limiting consumer access

MAS said that the majority of respondents in its consultation exercise were supportive of its proposal to introduce measures limiting access for retail customers.

“Respondents echoed MAS’ concerns that retail customers may not have the financial resources to withstand large losses, and were less able to access professional and legal advice,” it added.

It is thus imposing these restrictions on firms:

1. Not offering any incentives to trade in cryptocurrencies

• The regulator noted that any gift or incentive may “unduly influence” individuals to trade in cryptocurrency without fully considering the risks involved

• MAS will therefore disallow service providers from offering incentives, “monetary or otherwise”, to prospective and existing retail customers

2. Risk awareness assessment for customers

• Digital payment token service providers will be required to assess whether a retail customer has enough knowledge of the risks of digital payment services, before providing such services to the customer

3. No credit facility, no domestic credit card purchase

• Service providers will be restricted from providing any credit facility to a retail customer aimed at facilitating the customer’s purchase or continued holding of cryptocurrencies

• The service providers will also be restricted from entering into any leveraged digital payment token transaction with any other persons

• MAS will not allow the use of domestic credit card or charge card payments to buy cryptocurrencies, because such options “would allow retail customers easy access to debt financing”

4. Limiting the value of cryptocurrencies in determining customer’s net worth

• Respondents of the consultation exercise were supportive of allowing cryptocurrency to count towards an individual’s net personal assets when determining his or her eligibility to become an accredited investor

• An accredited investor is considered to be better informed and has the resources to protect his own interests than a retail investor, and is required to have net assets of more than S$2 million, among other criteria

• The regulator noted the “volatility and lack of economic fundamentals” underpinning the value of digital payment tokens

• Thus, a minimum 50 per cent reduction will be applied when calculating such assets towards an individual’s worth

Regulating business conduct

Besides limiting retail trader access, MAS also outlined the following measures aimed at regulating the business conduct of digital payment token service providers:

1. Identify, mitigate and clearly disclose potential and actual conflicts of interest to customers

• These potential or actual conflicts of interest may arise from the providers performing multiple roles such as operating a market while also acting as a broker

2. Publicly disclose their listing and governance policies for payment tokens listed on their markets and trading platforms

• Service providers must provide sufficient and understandable information before making a cryptocurrency available for trading on their platform, to allow customers to make informed decisions

3. Put in place policies and procedures to handle customer complaints and resolve disputes

• MAS at this point in time will not require service providers to submit regular reports of complaints data to the regulator

• However, these service providers are expected to “properly monitor” complaints and complaint trends to ensure that they are handled and resolved in a fair and timely manner, and to be able to provide such information to MAS when asked

Timeline of implementation

MAS said that more details on the rollout for the measures will be provided in the form of guidelines, to be published in mid-2024.

A nine-month transition period for implementation will be given.

“MAS encourages the industry to start early preparations to implement these measures and will continue to engage industry on the implementation progress.” — TODAY