Singapore says retail investors seem 'irrationally oblivious' to crypto risks, plans tougher rules

SINGAPORE: Singapore is planning to roll out new regulations that will make it more difficult for retail investors to trade cryptocurrencies at a time when they seem to be "irrationally oblivious" about the risks, its central bank chief said.

Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at an event on Monday (Aug 29) that despite warnings and measures, surveys show that consumers are increasingly trading in cryptocurrencies globally, not just in Singapore, attracted by the prospect of sharp price increases.

"They seem to be irrationally oblivious about the risks of cryptocurrency trading," he said.

"These may include customer suitability tests and restricting the use of leverage and credit facilities for cryptocurrency trading," he added at a seminar titled "Yes to digital asset innovation, No to cryptocurrency speculation."

Mr Menon said in his speech on Monday that MAS regards cryptocurrencies as unsuitable for use as money and as "highly hazardous" for retail investors.

But given that the cryptocurrency world is borderless, banning retail access is not likely to work, he said.

"With just a mobile phone, Singaporeans have access to any number of crypto exchanges in the world and can buy or sell any number of cryptocurrencies," he noted, adding that a multi-pronged approach is therefore required to safeguard consumers from harm.

"MAS is actively involved in international regulatory reviews to enhance market integrity and customer protection in the digital asset space," Mr Menon said.

"Second, the industry has an important role in co-creating sensible measures to protect consumer interests.

"MAS has been sharing its concerns with the industry and inviting views on possible measures to minimise harm to consumers," he added.

The MAS will seek public feedback on its proposals by October, Mr Menon said, adding that reviews are ongoing by regulators globally.

Singapore's welcoming approach has helped the financial hub attract digital asset services-related firms from China, India and elsewhere in the last few years, making it a major centre in Asia.

But recent defaults of some global cryptocurrency-related firms based in Singapore, many of which are not subject to the financial regulator's guidelines on consumer protection or market conduct, have triggered worries about tighter regulation.

In January, the MAS issued guidelines to limit cryptocurrency trading service providers from promoting their services to the public. Cryptocurrencies have plunged this year, as US interest rate increases and runaway inflation prompt investors to ditch riskier assets.

"MAS' facilitative posture on digital asset activities and restrictive stance on cryptocurrency speculation are not contradictory," Mr Menon said.

He also urged consumers to take responsibility and exercise judgment and caution.

"No amount of MAS regulation, global co-operation, or industry safeguards will protect consumers from losses if their cryptocurrency holdings lose value," said Mr Menon.