MAS Might Impose Limits on Investing with Loans to Safeguard Cryptocurrency Investors

Tharman Shanmugaratnam, the head of the Monetary Authority of Singapore (MAS), announced that new consumer protection measures could be implemented to restrict retail investment in the crypto sector. These could include limits on leverage trading - a strategy that has led to numerous crypto traders and firms going bankrupt in recent weeks.

Crypto: Should Not Be Used in Retail Environment

The minister's statement was in response to Murali Pillai, a politician representing the People’s Action Party (PAP) from Singapore's right wing. The politician asked whether MAS had plans to place greater restrictions on crypto trading platforms to protect "the unsophisticated persons" from entering "highly risky" crypto trades.

The minister reiterated the MAS's view that cryptocurrencies are "not suitable investments for the retail public," due to their exceptional price volatility. “Recent events have vividly demonstrated the risks, with prices of several cryptocurrencies falling drastically,” he added.

A month ago, Bitcoin and other cryptocurrencies fell to lows not seen since the crypto market peak in 2017. Market panic was largely caused by an ongoing risk of hawkish central bank policy, with rising inflation only prompting the Fed to speed up its rate hikes.

The collapse of the market, combined with Terra's failure in May, has triggered a chain reaction of failing crypto institutions that are trying to stay solvent. Trading and lending platforms like Celsius have been forced to freeze customer withdrawals as they try to pay down their crypto-collateralized debt.

In the light of similar happenings, MAS is now considering both “restrictions on retail participation” and "rules on leveraging", when trading cryptocurrencies. However, since the asset class has no borders, it knows that global cooperation and coordination will be necessary for restrictions to be effective.

“People can lose most of the money they have invested, or more if they borrow to purchase cryptocurrencies,” concluded the MAS minister.

In recent years, Singapore has made significant advances in its regulatory framework.

In January, MAS imposed a ban on public advertising of cryptocurrencies that it said was an effort to "downplay" their risks. It also joined other jurisdictions in strengthening its anti-money laundering and terrorist financing measures for digital assets in April.

The MAS has stated that it does not want to ban cryptocurrency transactions. The managing director of the MAS, in an interview last year, said that crypto could be beneficial for the economy and society.