An inquiry to assess whether aspiring investors understand the risks before being allowed to engage in the trading “game” is proposed by the Monetary Authority in a draft bill.
Those wishing to trade cryptocurrencies in Singapore may soon have to pass an exam to prove they understand what they are involved in, the city-state’s central bank announced today, in a bid to prevent ignorant investors from being ruined.
This Asian financial hub has very carefully developed its market for digital assets, but warned of the risks associated with cryptocurrency trading, particularly for small investors.
“Cryptocurrency trading has many risks and is not appropriate for the general public,” the Monetary Authority of Singapore (MAS) says in presenting its proposals to protect investors.
“However, cryptocurrencies play a supporting role in the broader digital asset sector and we are not considering banning them,” it continues.
As part of this plan, which will be subject to public scrutiny before it becomes law, MAS will require cryptocurrency service providers to ensure greater transparency by informing consumers of the risks.
Potential investors will also have to take a test to assess whether they understand the risks before they are allowed to trade cryptocurrencies. They will also be banned from using credit cards or payment apps to buy cryptocurrencies, MAS clarifies.
No inducement to encourage consumers to invest in cryptocurrencies will also be allowed.
Despite the risks, digital currencies continue to attract investors due to the significant gains that some investors make on them in short periods, MAS points out.
Cryptocurrencies are not backed by real assets, which makes them subject to huge price fluctuations and their trading is highly speculative.
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