Posted 1 year ago | by Ben Armstrong
Singapore may Allow Crypto Derivatives, Encourage BTC Transactions
Singapore has shown itself to be one of the most open nations to cryptos, and it looks like it is taking its crypto industry one step further. The Monetary Authority of Singapore (MAS), which is more or less the small nation's central bank, just announced that it will be looking into crypto derivatives.
According to the MAS statement:
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.
Crypto derivatives aren't new, but there are very few that are traded on major exchanges. Additionally, most crypto derivatives are cash settled, which means that if a trader or investor wants to stay within the crypto system, they are out of luck.
Use of Crypto Derivatives is Rising
According to statistics from BITMEX, a provider of leveraged crypto derivative products, the use of crypto derivatives is on a steady clip higher. The turnover of Bitcoin derivatives has actually eclipsed the trading volume of Bitcoin, which makes the expansion of crypto trading derivatives a smart move for Singapore.
Like any leveraged financial product, the use of crypto derivatives carries risks that regular tokens don't. There are also many small crypto and Contract for Difference (CFD) exchanges popping up, and they may not all be 100% honest.
To this end, the MAS commented:
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.
As a global financial hub, Singapore is probably looking to attract institutions and wealthy investors to its markets, by offering well regulated crypto futures.
Bitcoin Might be Legal Tender...Soon
While the MAS is working to keep crypto derivatives out of the hands of regular investors, much like any other form of sophisticated financial product, the move to potentially allow 'physically settled' crypto futures in Singapore may have the effect of legitimizing the use of tokens as a payment option.
As it stands today, tokens don't have a legal status in Singapore, although they can be used without any legal repercussions. If the MAS begins to regulate cryptos, and allows the use of derivatives on Singapore-based exchanges, it may help the public to see them as a viable option for making payments and personal savings.