Singapore, 20 November 2019... The Monetary Authority of Singapore (MAS) today issued a consultation paper proposing to allow payment token derivatives to be traded on Approved Exchanges and to regulate the activity under the Securities and Futures Act.
2 There is international institutional investor interest, for example from hedge funds and asset managers, in payment tokens such as Bitcoin and Ether. These institutional investors have a need for a regulated product to gain and hedge their exposure to the payment tokens. MAS’ proposal will allow Approved Exchanges in Singapore to meet the need of investors to manage their exposure to payment tokens while bringing the activity under regulatory oversight.
3 Payment tokens and their derivatives are, however, not suitable for most retail investors. These tokens tend to have little or no intrinsic value, are difficult to value, and exhibit high price volatility. Retail investors are advised to exercise extreme caution when trading in payment tokens and their derivatives; they could lose the whole amount put in and more. MAS will require Approved Exchanges and licensed intermediaries to include risk warnings tailored to payment token derivatives in informational materials provided to investors. Additional margins will also be collected from retail investors to introduce more friction in the trading of leveraged payment token derivatives and partially mitigate the risk of losses.
4 Please click here to view the consultation paper. MAS invites interested parties to submit their comments on the proposed regulation of payment token derivatives on Approved Exchanges to capital_markets@mas.gov.sg by 20 Dec 2019.
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Additional information
1. There are three main types of digital tokens – securities tokens, payment tokens and utility tokens. Derivatives that reference securities tokens are already regulated under the Securities and Futures Act. This consultation paper discusses the proposed regulatory approach for derivatives that reference payment tokens as underlying assets. Common payment tokens are Bitcoin and Ether. Payment tokens do not include utility tokens which are used to access a good or service offered by the token issuer.
2. Approved Exchanges are regulated as systemically important trading platforms under the Securities and Futures Act. There are currently four Approved Exchanges in Singapore: Asia Pacific Exchange Pte. Ltd., ICE Futures Singapore Pte. Ltd., Singapore Exchange Derivatives Trading Limited, and Singapore Exchange Securities Trading Limited. The list of Approved Exchanges can be found in the Financial Institutions Directory.