Crypto service providers should not offer credit services or accept credit card payments from their customers, MAS suggested.
The Monetary Authority of Singapore (MAS) is putting forward proposals to better regulate the crypto industry following the bankruptcy of Singapore crypto hedge fund Three Arrows Capital (3AC).

The Central Bank of Singapore has issued two consultation documents on proposals to regulate the operations of digital payment token service providers (DPTSPs) and stablecoin issuers under the Payment Services Act.

Published on October 26, both consultation documents aim to reduce the risks for consumers of cryptocurrency trading and improve the standards of stablecoin-related transactions.

The first document contains proposals for Digital Payment Token (DPT) services or services related to major cryptocurrencies such as Bitcoin.

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According to the authority, “any form of credit or leverage in DPT trading” would lead to “magnification of losses”, which could lead to losses greater than a client’s investment.

In section 3.20, MAS proposed to prohibit DPTSPs from providing merchant customers with “any credit facility”, whether in the form of fiat currency or crypto. According to the regulator, crypto service providers should also not be able to accept deposits with credit cards in exchange for crypto services.

“MAS proposes that DPTSPs ensure that client assets are separated from DPTSPs’ own assets and held for the benefit of the client,” the central bank noted, referring to the recent failure of several ventures in the crypto industry, including the one of 3AC. June insolvency.

Apart from this, the MAS also suggested that DPTSPs should consider adopting consumer tests to assess retail customers’ awareness of the risks associated with cryptocurrencies.

The second consultation document offers proposals for a regulatory approach to stablecoins in Singapore, which provides a set of business and operational requirements for stablecoin issuers.

In section 4.21 of the document, MAS proposed to restrict stablecoin issuers from borrowing or lending single currency-pegged stablecoins (SCS), as well as lending or trading other cryptocurrencies.

“This is to delineate and mitigate risks for the SCS issuer rather than a full risk-based capital regime. Such activities may still be undertaken by other related entities,” the consultation document reads.

The regulator also proposed to introduce a minimum capital base of $1 million or 50% of the annual operating costs of the SCS issuer. Capital must be maintained at all times and include liquid assets, MAS added.

Related: Hong Kong and Singapore Mega-Rich Consider Cryptocurrency Investments: KPMG

The regulator invites interested parties to submit their comments on the proposals before December 21, 2022.

As previously reported, the crypto winter of 2022 has become particularly harmful for crypto lenders, as many of these companies were unable to pay their obligations due to a massive market crash. Some Bitcoin analysts are confident that crypto loans can still survive this bear market, but they need to work out issues around short-term assets and liabilities.

Source: CoinTelegraph