SINGAPORE — Singapore’s deputy prime minister Heng Swee Keat warned retail investors to “steer clear” of cryptocurrencies following the recent Terra Luna crash which saw investors losing life savings.
That said, the crypto asset space, while highly risky, still had the potential to transform the future of finance, said Heng, who is also Coordinating Minister for Economic Policies, on Tuesday (31 March) at the opening of the Asia Tech x Singapore 2022 Summit.
“We must continue to adapt our rules to ensure that regulation remains facilitative of innovation, and yet addresses the key risks that crypto assets pose,” added Heng.
The DPM’s warnings to retail investors echoes calls from The Monetary Authority of Singapore which has consistently warned the public against trading in cryptocurrencies.
In January, the MAS issued guidelines to discourage cryptocurrency trading, including how Digital Payment Token service providers should not promote their crypto services to the general public. This was on the basis that trading in crypto was highly risky and volatile.
In April, Singapore passed a law that required virtual asset service providers which only do business overseas to be licensed.
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Underpinning the warning was the recent crash of TerraUSD and Luna which saw the cryptocurrency fall by more than 99 per cent earlier this month.
Terra, which ranked among the top 10 most valuable cryptocurrencies, dropped below US$1 on 11 May, after having peaked close to US$120 last month. Some investors later took to the Reddit forum to state how much they have lost, with some losing life savings.
The meltdown triggered knock-on effects on Bitcoin and other cryptocurrencies, Heng noted.
“Retail investors especially should steer clear of cryptocurrencies. We cannot emphasise this enough,” said Heng.
Tokenisation
However the digital asset ecosystem comprised a range of services beyond cryptocurrency trading and the Singapore government remained “keen to work with blockchain and digital asset players to encourage innovation, and build up trust in the sector,” he said.
MAS granted licenses and in-principle approvals to 11 digital payment token service providers in the past two years. These include stable coin players such as Paxos, Coinhako and financial institution DBS Vickers.
“We will continue to evaluate applications, and facilitate live experiments through regulatory sandboxes, to enable safe adoption in the financial sector,” added Heng.