Singapore’s financial regulator, the Monetary Authority of Singapore (MAS) is proposing to allow the trading of cryptocurrency derivatives on approved exchanges.
More specifically, the MAS is talking about derivatives based on the price of “digital payment tokens”, a subset of the assets we commonly refer to as cryptocurrencies. The MAS clarifies that the definition of payment tokens does not include “utility tokens which are used to access a good or service offered by the token issuer”.
To see what kind of attributes a crypto asset must have to be categorized as a digital payment token in Singapore, you can view this explanation by The Inland Revenue Authority of Singapore (IRAS). The agency lists Bitcoin, Ethereum, XRP, Litecoin, Dash, Monero, Zcash as examples of digital payment tokens.
The MAS says it is making the proposal in order to satisfy interest from institutional investors and bring regulatory oversight to the crypto derivatives market.
“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.”
In its consultation paper on the proposal, the MAS also points out that derivatives can serve as a stabilizing force on cryptocurrency markets.
“Indeed, the introduction of regulated Bitcoin futures in other jurisdictions has arguably instilled market discipline, and tempered exuberance and price volatility in the unregulated spot markets.”
Cryptocurrency derivatives are a lucrative part of the crypto trading business, but many of the popular derivatives platforms (BitMEX, Huobi, OKEx, Binance Futures) are either unregulated or operate under loose regulations.
In the United States, CME and Bakkt operate regulated Bitcoin futures markets, with CME providing cash-settled futures and Bakkt providing physically-settled futures (although Bakkt says it will also offer cash-settled contracts in the future).
The Monetary Authority of Singapore is poised to let crypto derivatives to be listed and traded on approved domestic exchanges, Singapore’s financial regulator said on Wednesday.
Under its proposal, trading of derivatives on cryptocurrencies like Bitcoin and Ethereum will be subject to the Securities and Futures Act. This proposal MAS said is made in response to interest from asset managers and hedge funds that trade such products.
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