Monetary Authority of Singapore building
Monetary Authority of Singapore building. The Straits Times

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has proposed to allow cryptocurrency-based derivatives to be traded on regulated platforms, the financial regulator announced in a press release on 20 November.

According to the blog post, MAS’ proposal aims to allow derivatives based on “Payment Tokens”, such as Bitcoin (BTC) and Ethereum (ETH), to be listed and traded on “Approved Exchanges”, and be subject to the city-state’s Securities and Futures Act (SFA). Interest from international institutional investors in the sector spurred MAS’ plans to regulate the products. The agency said in the press release:

“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.”

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Interest in Bitcoin derivatives comes as no surprise according to a recent Bloomberg article, which cites data from Skew and BitcoinTradeVolume. According to it, the global traded volume of BTC derivatives is around $5-10 billion, which is 10 to 18 times higher than spot trading.

Currently Singapore has only four approved exchanges, them being the Asia Pacific Exchange, ICE Futures Singapore, Singapore Exchange Derivatives Trading, and Singapore Exchange Securities Trading Limited.

If MAS starts regulating payment token derivatives, these exchanges will be required to provide investors with informational materials that include risk warnings about the dangers of trading such derivatives. MAS has also warned that:

“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.”

The United States regulators recently gave the green light to financial technology firm Tassat to transfer existing registration rights from its affiliated New York-based financial services firm trueEX.

The transfer of the Swap Execution Facility (SEF) and Designated Contract Market (DCM) registrations will allow Tassat to launch a compliant crypto derivatives exchange.

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