Singapore Monetary Authority: Proposed cryptocurrency derivatives to be listed on the Compliance Exchange

Yesterday, the Singapore Central Bank and financial regulator, the Singapore Monetary Authority (MAS), proposed to allow cryptocurrency derivatives to be listed and traded on approved local exchanges.

The Singapore Monetary Authority said in a statement on Wednesday that under this proposal, derivatives transactions related to cryptocurrencies such as Bitcoin and Ethereum will be subject to Singapore's Securities and Futures Act of Singapore.

The Singapore Monetary Authority said the proposal was in response to interest from institutional investors such as hedge funds and asset management companies. According to the HKMA, there are currently four approved exchanges in Singapore: Asia Pacific Exchange, Singapore ICE Futures Exchange, Singapore Exchange Derivatives Trading and Singapore Exchange Securities Trading Limited.

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The regulator stated in a consultation paper:

“A well-regulated derivatives market—especially a derivatives market supported by institutional investors with complex risk management and investment strategies—can serve as a more reliable reference for the value of related assets.”

It is worth noting that the Singapore Monetary Authority classifies Bitcoin and Ethereum as “payment tokens”.

Cryptographic currency derivatives have become popular in the US derivatives exchange giant Chicago Mercantile Exchange (CME), which has been offering bitcoin futures since 2017. It trades nearly 7,000 futures contracts (equivalent to about 35,000 bitcoins) on average every day. The Chicago Mercantile Exchange is also preparing to launch bitcoin options in January next year.

Another US exchange, Bakkt, is a subsidiary of the Intercontinental Exchange (ICE), which provides physical settlement of bitcoin futures contracts and plans to offer cash-settled bitcoin futures contracts based on customer demand. Like the Chicago Mercantile Exchange, Bakkt plans to launch its own options contract through the Singapore ICE Futures Exchange as soon as possible.

The Singapore Monetary Authority said it believes that cryptographic derivatives are “not suitable” for retail investors.

“Recommended that retail investors are extremely cautious when trading tokens and their derivatives; they may lose all of their investment, or even more.”

British financial regulators have similar ideas. The country's Financial Market Conduct Authority (FCA) recently proposed prohibiting the sale of cryptocurrency derivatives to retail investors.

The Singapore Monetary Authority will seek public comment on this proposal by December 20.

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