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    MAS Consults on Regulatory Approach for Payment Token Derivatives

    November 20, 2019

    MAS published a consultation paper on its regulatory approach under the Securities and Futures Act (SFA) for derivatives contracts that reference payment tokens as underlying assets (Payment Token Derivatives). To reflect the intended regulatory scope of Payment Token Derivatives under the SFA (discussed in Section 3 of the consultation paper), MAS is proposing to amend the Securities and Futures (Prescribed Underlying Thing) Regulations 2018. Annex B contains the text for amendments being proposed under the SFA. The consultation closes on December 20, 2019.

    MAS has received queries from industry participants about whether Payment Token Derivatives, like those referencing Bitcoin and Ether, fall within the regulatory scope of SFA. MAS has also received indications of interest for Payment Token Derivatives regulated under the SFA to be made available to investors in Singapore. In calibrating the regulatory response, MAS intends to adopt a balanced view that seeks to allow innovation to co-exist in a regulatory environment with high standards. The consultation paper sets out the views of MAS on the appropriate regulatory approach for Payment Token Derivatives under the SFA.

    The trading of the most popular digital tokens has largely been on unregulated markets. There has been interest from international institutional investors for a regulated alternative that could mitigate some of the concerns. Such regulated alternatives have recently emerged. In particular, Bitcoin futures have been listed and are traded on the U.S. futures exchanges. A well-regulated market for derivatives—particularly one anchored by institutional investors with sophisticated risk management and investment strategies—can serve as a more reliable reference of value for the underlying asset. 

     

    Comment Due Date: December 20, 2019

    Keywords: Asia Pacific, Singapore, Banking, Securities, Payment Token Derivatives, SFA, Securities and Futures Regulation, Derivatives, MAS

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