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Singapore proposes borrowing ban to fund crypto purchases

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Singapore has proposed banning private investors from borrowing to fund their cryptocurrency purchases. This is part of a number of proposals to further strengthen the regulatory regime for digital assets in city-states.

Other potential measures in the Monetary Authority of Singapore consultation paper include prohibiting companies from using tokens deposited by such investors to lend or stake to generate yield. It is included. Staking is the process of earning rewards by deploying coins in crypto applications.

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Cryptocurrency prices are “very volatile and leverage can result in huge losses for customers,” the central bank said in a paper Wednesday, citing retail sectors using credit cards and other credit institutions to He added that coins cannot be purchased.

According to the document, stablecoins (tokens intended to have a fixed value) must be pegged to local dollars or Group 10 currencies and fully backed by reserve assets of the same denomination. Issuers are also subject to minimum capital requirements.

Singapore has been hit by a series of cryptocurrency crashes following a $2 trillion crash in digital assets. This caused the TerraUSD algorithmic stablecoin to drop. Regulators around the world are grappling with ways to protect consumers while taking advantage of the innovations offered by cryptocurrencies.

Keeping retail investors out of token lending and staking limits access to decentralized finance and DeFi, which are often touted as critical to cryptocurrency adoption. However, DeFi has been hit by a series of hacks and the high yields now available on traditional investments such as US Treasuries.

Prior to the talks, Singapore had already taken measures such as cracking down on crypto marketing. Also, virtual asset providers must be licensed locally, even if they only operate abroad.

The central bank said in a paper Wednesday that it has refused to completely ban cryptocurrency services for retail consumers.

The feedback period on the consultation paper will continue until December 21st, after which the final guidelines will be set. Digital asset service providers will then give him six to nine months to comply with the rules.

read more: Dubai’s BitOasis and Mastercard Sign Deal for Crypto Link Card

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