Singapore says retail investors are “irrationally uninformed” of cryptocurrency risks and plans stronger controls.

It was written by Yantoultra Ngui and Anshuman Daga.

Singapore

At a time when individual investors appear to be “irrationally ignorant” of the risks, Singapore is preparing to implement new restrictions that will make it more challenging for them to trade cryptocurrencies, according to the head of the country’s central bank.

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Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at an event on Monday that despite warnings and precautions, more and more people are trading in cryptocurrencies around the world, not just in Singapore. They are attracted by the possibility of rapid price increases.

He said that they seem to be stupidly unaware of the risks that come with trading in cryptocurrencies.

The MAS was thinking about “adding friction” to retail access to cryptocurrencies, he said.

At a seminar called “Yes to digital asset innovation, No to cryptocurrency speculation,” he said, “These could include assessing whether a customer is a good fit and banning the use of leverage and credit facilities for cryptocurrency trading.”

Singapore has become one of the most important places in Asia because it has been able to attract companies from China, India, and other countries that offer digital asset services.

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However, recent failures of certain Singapore-based international cryptocurrency businesses, many of which are exempt from the financial regulator’s rules on market behaviour and consumer protection, have raised concerns about stricter oversight.

According to Menon, by October, the MAS would ask for public input on its ideas. He also noted that authorities around the world are still conducting reviews.

In January, the MAS put out rules that limit how bitcoin trading service providers can market their services to the general public.

This year, the prices of cryptocurrencies have dropped because investors are avoiding riskier investments because U.S. interest rates are going up and inflation is going crazy.

Menon asserted that “MAS’s accommodative position on digital asset activity and its restricted stance on cryptocurrency speculation are not incompatible.”

Related: Singapore’s economy will grow more slowly in ’23, according to MAS.

The American cryptocurrency exchange Gemini and the cryptocurrency exchange Huobi, which was based in China at first, both have a big presence in Singapore.

In 2020, under a new system, approximately 180 crypto businesses sought a crypto payments licence from the MAS, but Singapore has only issued roughly two dozen licences so far following a thorough due diligence process that is currently ongoing.