Singaporean authorities are collaborating with banks that offer crypto services to set up new vetting standards, as BNN Bloomberg reported.
The country’s central bank officials have been active on the project for six months, the BNN Bloomberg article stated.
The project
According to the Monetary Authority of Singapore (MAS), the fact that there are no rules that manage banks that collaborate with businesses that handle cryptocurrencies creates a significant risk for investors.
A spokesperson from MAS detailed the purpose of the project by stating:
“As with any other current or prospective customer, banks are required to conduct customer due diligence measures to understand and manage the risk(s) posed by them.
Banks make their own determination of whether to start or continue a banking relationship with a customer, balancing between commercial considerations and business risk tolerance.”
All lenders in the city-state that offer accounts that can hold digital assets fall under this project’s scope. In addition, stablecoins, non-fungible tokens (NFTs), Web3 gaming, and streaming are also included within the framework of this study.
An industry report summarizing best practices in the field, due diligence approaches, and risk management techniques are expected to be published in the next two months.
Singapore on crypto
Singapore was known for its crypto-friendly attitude until Singapore-based Three Arrows Capital (3AC) collapsed in July 2022. After the 3AC bankruptcy, MAS publicly stated its discomfort regarding the regulation-free nature of the crypto sphere and added that it would start taking precautions to prevent similar malicious activities from happening in the future.
Singapore followed up on its words and proposed a new bill to regulate cryptocurrencies and stablecoins in Oct. 2022. The bill assumed all crypto assets as “inherently risky” and took measurements fitting that approach.
The MAS took another decision in Nov. 2022 to specifically halt banks’ collaborations with the crypto companies. In addition, it added, it mandated all banks in Singapore that crypto assets hold $125 of capital against every $100 exposure to crypto.
Even though the country is tightening regulations, MAS’s Chairman, Tharman Shanmugaratnam, stated vague opinions concerning the benefits of crypto regulations. Shanmugaratnam spoke at the WEF23 in Jan. and questioned if crypto regulations would legitimize the corruption that is an inherent aspect of the crypto sphere.
He stated:
… if we’re thinking about regulating crypto the same way we regulate banks or insurance companies, I think we have to take a step back and ask a basic philosophical question: does that legitimize something that is inherently, purely speculative, and in fact slightly crazy?”
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