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Singapore proposes additional rules to safeguard retail crypto investorsSingapore announced on Thursday its intention to implement new regulations aimed at protecting individuals by limiting their ability to trade cryptocurrencies.Photo by Daniel Welsh on UnsplashRules follow public consultation processIn a press release published to its website on Thursday, the Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator, finalized these measures following a yearlong public consultation and review of cryptocurrency platforms, also known as digital payment token (DPT) service providers.Effective in phases from mid-2024, one key measure will prevent operators from accepting purchases through locally issued credit cards. Along the same lines, the regulator wants operators to discourage the use of margin and leverage transactions, or borrowing to facilitate trading activity. Market commentators, such as Custodia Bank Founder and CEO Caitlin Long, have long warned of the havoc that leverage has played in the crypto sector. Last year Long commented:”SO MUCH of the garbage in #crypto during this cycle was just leverage dressed up as tech innovation.”Additionally, incentives that encourage individuals to trade digital tokens will be banned. Such incentives could include providing free trading credits or digital assets as rewards during sign-ups or referrals.Curbing speculationWhile the MAS acknowledges the speculative and highly risky nature of cryptocurrency trading, it asserts that these regulations aim to help cryptocurrency operators protect customer interests. However, the MAS emphasizes that the regulations “cannot insulate customers from losses associated with the inherently speculative and highly risky nature of cryptocurrency trading.”Ho Hern Shin, the Deputy Managing Director for Financial Supervision at the MAS, urged consumers to exercise caution, stating:“We urge consumers to remain vigilant and exercise utmost caution when dealing in DPT services and to not deal with unregulated entities, including those based overseas.”The MAS expanded the scope of these measures to include all retail customers, regardless of their residency, following public feedback. This includes individuals who are not accredited investors or institutional investors. Accredited investors are those with over $1 million in net financial assets, among other criteria.Responding to crypto platform failuresThese regulatory steps come in response to the increasing access of individuals to the risky asset class, driven in part by the collapse of several unlicensed cryptocurrency companies in Singapore such as Hodlnaut and Vauld last year. The resulting calls for greater oversight prompted the MAS to initiate a feedback-gathering exercise in October, seeking input from industry players on proposed measures and other framework-establishing proposals.The bankruptcy filing of cryptocurrency group FTX the following month further accelerated the need for regulatory action globally, including in Singapore. In July, the MAS published the initial set of measures based on the consultation, requiring operators to keep customer assets in a trust and limiting their lending and “staking” of digital payment tokens.Staking, a process enabling investors to earn yields by depositing crypto assets for use in blockchain transactions, is among the activities facing restrictions. MAS Managing Director Ravi Menon criticized cryptocurrencies recently, stating that they have “failed the test of digital money,” citing poor performance as a medium of exchange or store of value and susceptibility to sharp speculative swings, leading to significant losses for many investors.

Japanese Exchanges Canvas Regulator to Permit 10x LeverageJapan’s cryptocurrency exchanges are advocating for looser regulations on margin trading, despite the global digital asset market crash experienced last year.According to a report published by Bloomberg on Monday, The Japan Virtual & Crypto Assets Exchange Association has revealed that many industry insiders are seeking leverage limits of four to 10 times for retail investors.Currently, customers are limited to doubling their exposure through borrowing. Genki Oda, the Vice Chairman of the association, believes that relaxing the leverage rule could enhance Japan’s appeal to crypto and blockchain companies, thereby stimulating increased trading activity.Photo by Su San Lee on UnsplashOngoing discussionJapanese digital asset exchanges are currently engaged in discussions to establish a consensus on the recommended leverage limit. They are planning to present their proposal to the Financial Services Agency (FSA) as early as next month.While Japan has made some efforts to ease certain cryptocurrency regulations, such as token listing and taxation, the overall regulatory environment is considered strict. The FSA expects crypto firms to provide solid justifications for loosening margin trading caps, demonstrating how it would contribute to the government’s objective of expanding blockchain-based industries. However, the agency remains open to discussions with digital asset businesses on the matter.Plummeting trade volumesPreviously, Japanese crypto platforms offered leverage up to 25 times, resulting in annual margin trading volumes of approximately $500 billion in 2020 and 2021. However, after the FSA imposed a limit of two times to curb excessive speculation and protect investors from amplified losses, trading volumes plummeted by 75% in 2022.In other parts of the world, digital asset exchanges typically offer spot margin trading with leverage ranging from five to 10 times the initial deposit, depending on local regulations. Some platforms even offer more aggressive lending options, often associated with speculative behavior that can generate waves of greed and fear within the crypto market.Oda argues that digital asset volatility has decreased since 2020 and asserts that Japanese exchanges are well-prepared to assist investors in managing the risks associated with margin trading positions. However, any relaxation of leverage rules is not expected to occur before 2024.Leverage dangersLast year’s global cryptocurrency downturn exposed risky practices and resulted in numerous bankruptcies. Regulators worldwide have responded by implementing new rules and regulations that address the lessons learned. While leverage might be in the interests of the exchange operators, many industry commentators have warned that leverage brings about market weakness.Caitlin Long, Founder and CEO of Custodia Bank, has been one such commentator, warning that massive leverage “built an industry of insolvent intermediaries” on a “foundation of sand”. It’s commonly believed that leverage leads to unsustainable market bubbles rather than iterative organic market growth.In 2022, an index tracking the top 100 cryptocurrencies partially recovered, showing a 33% increase since the beginning of this year. However, the market still faces challenges, as institutional and individual investors have exited, leading to reduced liquidity and lower expectations for price volatility in Bitcoin and other cryptocurrencies.

The Dubai Financial Services Authority (DFSA), the financial regulatory agency of the Dubai International Financial Center (DIFC), a special economic zone, has approved two stablecoins under its crypto regulatory framework. The two stablecoins, USD Coin (USDC) and EURC, are both issued by blockchain-focused financial services firm Circle. While USDC is a U.S. dollar-backed stablecoin, EURC is a euro-backed stablecoin. In a press release published on the Circle website on Feb. 24, the company announced details regarding the approval. The stablecoins are the first to be recognized and approved by the DFSA.Photo by Christoph Schulz on UnsplashStablecoin integrationThe development means that firms based in the DIFC are now free to integrate either stablecoin into digital asset applications and products focused on areas such as payments and treasury management. A number of Circle executives took to social media to comment on the development. Circle Co-founder and CEO Jeremy Allaire outlined on X that the approval means that financial institutions in Dubai “are now able to transact in markets with USDC and EURC.” In legally recognizing the two stablecoins, Allaire pointed out that the DFSA had joined regulators in the European Union (EU) and Canada.  Last Summer, Allaire announced that Circle’s stablecoins complied with the EU’s Markets in Crypto Assets (MiCA) regulation. In December, Circle became the first stablecoin issuer to meet Canadian listing regulations. Dante Disparte, Circle’s chief strategy officer and head of global policy, pointed out that a trend is emerging requiring the pre-clearing of stablecoins prior to them entering into circulation or gaining regulatory approval. “In always-on finance, reciprocity is key,” he added.  Meanwhile, the firm’s EU Strategy & Policy Director, Patrick Hansen, underscored the significance of the approval. Hansen pointed to the fact that the DIFC is home to 6,000 registered entities, including 800 authorized financial firms. An ‘edge’ over TetherEugene Cheung, Chief Institutional Business Officer at Hong Kong-based digital asset platform OSL, said that the approval was “massive for institutional adoption,” while giving Circle an “edge” over Tether within the $157 billion stablecoin market. While Circle has always taken a regulatory-compliant approach, competitor Tether has struggled with compliance. In Europe, 10 companies have been approved to issue stablecoins under MiCA regulations, but Tether is not among them. This has led to a number of exchanges delisting Tether’s USDT in Europe. The DIFC was first established in 2004. The economic free-zone caters to firms operating within the Middle East, South Asian and African regions. The number of businesses registered within the free zone has increased by 25% since 2023. In November 2022, the DIFC recognized Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). The following year, it added Toncoin (TON) and Ripple’s XRP, together with ZETA, the native token of the ZetaChain network. In 2024, the DFSA amended its crypto regulations to allow foreign funds to invest in recognized crypto tokens, while enabling domestic qualified investor funds to invest in unrecognized tokens.Although the regulatory approach taken by the authorities in Dubai accommodates stablecoins, algorithmic stablecoins are prohibited.