Singapore plans to introduce crypto derivatives

Singapore plans to introduce crypto derivatives

Singapore’s financial regulatory authority announced that it is evaluating whether to allow crypto derivatives to be traded in the nation.

Singapore vows to introduce crypto derivatives

In response to the increasing interest from institutional investors to trade crypto-related products, the Monetary Authority of Singapore (MAS) issued a consultation paper proposing to let such products be traded on approved exchanges.

As investors seek to hedge their exposure to these assets, they will be able to submit their comments on the proposed regulation until Dec. 20. This is when the deliberation would close.

The announcement reads:

“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.”

The move comes after the rise in popularity that crypto derivatives products have had over the last few years. BitMEX, one of the leading cryptocurrency derivative trading platforms around the world, was once considered to have a worthless product catering to gambling addicts.

Today, the crypto futures market represents more than 10x the volume that the underlying Bitcoin spot market has, according to data from Skew and Bitwise.

BitMEX bitcoin futures contracts volume chart
BitMEX’s futures contracts volume. Source: Skew

Now, the MAS is recognizing that crypto derivatives have become the financial product that the majority of interested parties want to trade. As a result, it is planning to allow hedge funds and asset managers to trade this type of product.

However, the regulatory body encourages retail investors to have a cautious approach. In the consultation document, the MAS suggested different measures to protect retail investors, such as a minimum 50 percent margin requirement.

The MAS said:

“Retail investors are advised to exercise extreme caution when trading in payment tokens and their derivatives; they could lose the whole amount put in and more. MAS will require Approved Exchanges and licensed intermediaries to include risk warnings tailored to payment token derivatives in informational materials provided to investors.”

Jennifer Ilkiw, vice president for Asia Pacific at the Intercontinental Exchange (ICE), values the efforts put up by the MAS to address the needs of institutional traders.

According to Ilkiw:

“A clear regulatory framework will support the healthy development of digital-asset markets.”

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