A recent consultation paper from the Monetary Authority of Singapore (MAS) makes proposals for existing regulations to be changed; this comes in light of emerging blockchain-related business practices on the city-state island.
The report comes shortly after the Singapore government and MAS made preparations to launch a pilot blockchain proof-of-concept project to conduct inter-bank payments utilizing blockchain technology.
Revamping old regulations
MAS, the central bank of Singapore has had regulations for recognized market operators (RMOs) in place since 2002, and it finds that’s the “single tier” regulatory framework fails to meet the demands of the “changing landscapes.”
“A multi-tier RMO regime with gradated requirements can better accommodate the emergence of new business models such as blockchain-based or peer-to-peer trading facilities, and lower the cost of entry for start-up operators,” writes MAS.
The proposition is to now expand the single tier into three separate tiers that cater to the needs of smaller-sized exchanges entering the market.
MAS has introduced the tiers within the RMO framework in the belief that it would allow for market operators to choose a regulatory tier that better matches “their risk profile and business model”.
Tier 1 addresses the requirements of “market operators that wish to target retail investors, but which are smaller in scope and have far less retail investor participation than traditional stock and derivatives exchanges”. This tier is for operators that don’t pose systemic risks and will be allowed to serve retails investors should they meet additional retail investor protection requirements.
Tier 2 is aimed at market operators who already qualify under the present RMO regime but don’t pose system-wide risks and serve only non-retail investors.
Tier 3 applies to significantly smaller market operators in comparison to established exchanges; operators in this tier will be subject to more flexible capital requirements, technology risk management, and outsourcing.
The MSA explains, “This new tier is designed to facilitate new entrants that develop solutions for wholesale market participants or market operators that have reached the end of their sandbox tenure and are commercially viable, but whose businesses are not able to meet the requirements of the existing RMO regime.”
Earlier this year the MAS chief fintech officer Sopnendu Mohanty revealed his concerns regarding the speculative cryptocurrency investors. He is of the belief that it is negatively impacting on experimentation with blockchain technology.
In an interview with CNBC, Sopnendu said: “But the speculators and the people who are making money out of this speculation of the cryptocurrency (market) are perhaps negatively impacting the whole experimentation of cryptocurrency.”
Furthermore, the MAS is interestingly working on its own blockchain initiative called Project Ubin. which was announced in late 2016 and will contribute to Singapore’s overall advances toward understanding how to regulate cryptocurrencies and blockchain technologies.
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