On November 20, the Monetary Authority of Singapore (MAS), the country’s regulator and de-facto central bank, issued a consultation paper “Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens”, proposing to allow cryptocurrency derivatives trading on approved exchanges and regulate it under the Securities and Futures Act.
According to the consultation paper, the proposal is driven by demand from institutional investors for “regulated alternatives that could mitigate” the risks associated with current trading of assets like bitcoin (BTC) and ether (ETH) on unregulated platforms.
With the proposal, MAS claims to provide a balance between boosting the growth of innovations and maintaining “high standards” of regulatory environment, by allowing cryptocurrency derivatives trading on strictly regulated, approved exchanges.
The authority invites all stakeholders to submit feedback on the proposed regulation by December 20.
Due to high volatility and unclear valuation mechanisms, MAS finds Payment Token Derivatives not “suitable for most retail investors”. For now, the regulator proposed that 1.5x the margin requirement or 50% of the contract value, whichever is higher, should be collected from retail investors. Later, MAS plans to introduce additional measures for retail investors by 30 June 2020, which can “serve to discourage retail investors from trading in these highly risky products.”
As COIN360 reported earlier this month, Singapore’s regulator has also completed development of a blockchain-based cross border payments system that can support a range of currencies. The so-called Project Ubin prototype platform was developed in partnership with JPMorgan and Singapore government-owned investment firm Temasek.