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Singapore consults on retail crypto and stablecoin laws
The Financial Authority of Singapore (MAS) has proposed new measures regulating cryptocurrency exchanges and retail crypto choices in addition to addressing the dangers related to fiat-backed stablecoins.
On 26 October, the MAS – the central financial institution and monetary regulatory authority of Singapore – issued two session papers. The first paper outlines proposed new measures to guard customers and which the MAS says are supposed to curb cryptocurrency hypothesis. These embody:
- requiring retail traders to undertake a threat consciousness evaluation earlier than buying and selling cryptocurrencies;
- restrictions on providing incentives to retail traders to commerce cryptocurrencies;
- proscribing retail traders from utilizing credit score or leverage to commerce cryptocurrencies (together with bank cards to buy cryptocurrency);
- requiring exchanges to segregate buyer belongings from their very own belongings (and, doubtlessly, appoint an impartial custodian);
- prohibitions on lending or borrowing retail consumer’s crypto-assets, successfully banning customers from so-called “earn-type” or staking merchandise (following a number of high profile insolvencies involving companies which supplied these merchandise);
- requiring crypto exchanges to establish and mitigate conflicts of curiosity; and
- requiring exchanges take steps to deal with market misconduct by implementing methods and procedures to encourage a good, orderly and clear market.
MAS defined its rationale for ramping up shopper protections:
Buying and selling in cryptocurrencies…is very dangerous and never appropriate for most of the people. Nevertheless, cryptocurrencies play a supporting function within the broader digital asset ecosystem and it will not be possible to ban them. Due to this fact, to cut back the danger to customers from speculative buying and selling in cryptocurrencies, MAS would require…correct enterprise conduct and ample threat disclosure
The second paper proposes a brand new regime to control and assist the event of credible and dependable stablecoins that facilitate digital transactions. Proposed laws would goal stablecoins whose worth in circulation exceeds SG$5 million (about US$3.54million). The proposed measures would create a category of MAS licensed single foreign money stablecoins (or SCS). Key measures embody:
- stablecoin issuers should maintain reserve belongings (e.g. money) no less than 1:1 of worth in circulation and supply well timed redemption to prospects;
- regulated stablecoins have to be pegged to a single foreign money;
- stablecoin issuers will likely be required to publish a white paper; and
- stablecoins issuers should meet a base capital requirement.
As well as, banks in Singapore could be allowed to difficulty stablecoins with no further reserve backing and prudential necessities in gentle of current banking laws.
The MAS can also be in search of views on whether or not it ought to reserve the ability to designate a systemic stablecoin association as a delegated cost system.
In a press release, MAS expressed its continued assist for stablecoin improvement:
Stablecoins have the potential to be a medium of change to facilitate transactions within the digital asset ecosystem, supplied they’re well-regulated and securely backed. The present regulatory framework…will likely be expanded to make sure that regulated stablecoins have a excessive diploma of worth stability.
Consultations on each papers are open till 21 December 2022. MAS intends to implement the brand new measures as a part of the Fee Companies Act, which launched Singapore’s licensing regime for cryptocurrency exchanges.
The session papers comply with recent comments by the MAS which indicated the city-state’s intention to assist tokenisation and the expansion of the digital belongings trade, whereas addressing potential shopper harms.
Some critics have voiced concerns that the proposed shopper protections could also be overly prescriptive, and that the prohibition on buying tokens utilizing credit score or leverage might inadvertently encourage retail traders to commerce in crypto derivatives. The proposed prohibition on providing earn or staking merchandise would ban even regulated entities from providing these merchandise whereas encouraging retail customers to hunt out unregulated DeFi or international choices. In the meantime, Singapore is more likely to encounter the identical limitations confronted by different jurisdictions in monitoring and controlling buying and selling by its residents on abroad platforms.
These proposals nonetheless show Singapore’s dedication to cement its standing as a world hub for cryptocurrency improvement and fintech innovation. With the EU’s MiCA regime on the horizon, Singapore will seemingly be a part of the EU on the forefront of cryptocurrency regulation and entice consideration from legislators all over the world as they craft their very own regulatory regimes.
Visa strolling in the direction of crypto pockets providing
In October funds large Visa Worldwide Service Affiliation (Visa), a subsidiary of Visa Inc., filed two trademark applications with the US Patent and Trademark Workplace (USPTO) overlaying a variety of crypto services. The trademark applications associated to digital wallets, non-fungible tokens and the metaverse.
Visa has been energetic inside the crypto area and have partnered with over 65 crypto firms together with pockets service supplies and exchanges to allow crypto funds utilizing their playing cards. In December 2021, Visa launched its crypto advisory providers and in May 2020 Visa filed a patent utility for a fiat-linked crypto system utilizing a non-public permission DLT platform.
Visa’s latest trademark applications cowl:
On-line non-downloadable software program for administration of digital transactions; non-downloadable digital items; non-downloadable digital items, particularly, a collectible sequence of non-fungible tokens; on-line non-downloadable software program to be used as a digital foreign money pockets and storage providers software program; on-line non-downloadable software program to be used as a cryptocurrency pockets.
This improvement by Visa follows different firms who’ve filed crypto associated trademark functions with the USPTO over the previous yr, together with American Express, the New York Stock Exchange, Meta and Mastercard, PayPal and Western Union.
Patent and Trademark filings within the US are sometimes aggressively pursued by companies in relation to potential tasks, and never all filings turn out to be ultimate choices. Time will inform if Visa is really bringing extra crypto-enabled merchandise to their enormous buyer base globally.
Debate heats up over digital belongings trade requirements
CEO and co-founder of FTX, Sam Bankman-Fried, has released a draft set of possible digital asset industry standards that may very well be enacted to encourage readability and shopper safety pending a full federal US regulatory regime (the Proposal). Despite positive progress in recent months, the proposed requirements are an try to supply options and open a dialogue about regulation and set up a consensus round trade norms.
The Proposal covers hacks and accountability, asset listings, tokenised equities, shopper safety, sanctions compliance, DeFi, and stablecoins. It begins by contemplating methods to nullify the affect of hacks which have been a prominent issue in latest months. The Proposal suggests a ‘5-5 Customary’ as a consensus negotiation commonplace between an aggrieved protocol and hacker the place a hack happens. The usual would require the hacker to return as a lot cash as is required to make sure the protocol’s reserves are sufficient to make prospects entire, whereas retaining 5% or $5million (whichever is decrease) as a bug bounty.
Subsequent, and maybe unsurprisingly, the Proposal discusses what digital belongings can and can’t be listed on exchanges. In line with the Proposal, FTX’s authorized staff will do an evaluation of belongings utilizing the Howey Check and different related case regulation and steerage. If the asset is deemed to be a safety it is going to be handled as such. If the asset is just not discovered to be a safety, FTX will typically deal with it as a non-security commodity, except alternate route is obtained from the SEC or a reliable Courtroom. Mr Bankman-Fried hopes that finally registering digital asset securities will be accomplished in a means that protects customers and permits for innovation.
The Proposal additionally focuses on shopper safety and encourages a crack down on belongings that misrepresent or make deceptive claims to customers. Mr Bankman-Fried additionally proposes that, as a default, methods mustn’t meaningfully run on credit score, particularly for retail. It is because retail traders shouldn’t be in a position to lose greater than they’ve deposited to a platform, and as such, any credit score given by platforms needs to be scrutinized if it might lead to socialising losses amongst different harmless traders on the platform.
The Proposal’s options on sanctions compliance and DeFi, which embody a proposal that DeFi front-ends could also be licensed and incorporate sanctions screening, elicited controversy amongst some DeFi supporters.
The Proposal is a helpful contribution to the regulatory debate over digital belongings and has served in upsetting dialogue about regulatory requirements for the trade. A number of prominent crypto personalities have weighed in with their views on the proposals together with ShapeShift founder, Erik Voorhees, who agreed to a live online debate with Mr Bankman-Fried over the deserves of the proposed requirements. We anticipate that this debate will proceed to rage for a while to come back.
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