The Central Bank of Singapore has presented two consultation pamphlets to crypto service providers. The failure of the Singapore cryptocurrency fund Three Arrows money (3AC) resulted in this proposal. Singapore Authority is implementing measures to better regulate the crypto industry, Cointelegraph reported.
Two consultation pamphlets on ideas for controlling the activities of stablecoin holders were discussed. Also, Online Payment Token Service Providers (DPTSP) under the payment act have been released. The Central Bank has been in charge of formulating policies regulating the industry.
Why Singapore Proposed to Ban Crypto Credit Facilities
The papers were released on October 26 to regulate the risk in crypto trading. To lower the risks associated with trading, it raised the bar for her stablecoin-related activities. With this, Singaporeans will have to take a test before accessing credit facilities meant for crypto traders.
Content of the Consultation Papers
The first paper contains a proposition for online payment token services. Crypto-related services like BTC, Ethereum (ETH), and XRP were included.
The authority claimed that using any form of leverage in the trading of DPTS would lead to losses. Sometimes, these losses may be greater than the customer’s investment.
Section 3.20 0f the MAS proposal would ban DPTSPs from giving any crediting to small-scale investors. This ban is on both fiat money and cryptocurrency. The regulator asserts that crypto service providers should not be allowed to receive unregulated payments. People making payments with credit cards in exchange for cryptocurrency services would be punished.
In addition, the MAS recommended that DPTSPs use consumer testing. This would gauge the awareness of crypto hazards among small-scale crypto investors.
MAS cited the recent failures of many firms in the crypto industry, including 3AC s problems in June. Therefore, the authority proposed that DPTSP should separate its customer’s funds from its assets.
The authority also intended to prohibit stablecoin holders from staking SCS stablecoins. Also, lending or trading other cryptocurrencies will not be allowed. This was suggested under section 4.21 of the consultation paper.
SCS holders must have a minimum start up capital of $1 million or 50% of the operational expenses should be the requirement. This must be held at all times, and it should be recorded in liquid assets, MAS stated.
The authority urged interested parties to submit their suggestions on the proposals. The suggestions should be submitted on or before December 21, 2022.