Singapore’s financial regulator is clamping down on the marketing of cryptocurrency services in the city-state in a further setback for digital asset service providers looking to establish themselves in the Asian financial hub.
The Monetary Authority of Singapore on Monday published a set of guidelines instructing crypto businesses to stop marketing or advertising their offerings to retail investors in public spaces, both physical and virtual, calling the trading of such assets “highly risky and not suitable for the general public”.
The guidelines are not legally binding, but the announcement comes as authorities have already disappointed several businesses with the slow pace of approvals for platforms looking to set up operations in Singapore.
Effective immediately, cryptocurrency players should not solicit customers through ads on social media platforms or other public websites, on public transport such as buses and trains or the venues where they stop, or through broadcast and print media. They are also discouraged from providing physical ATMs for dispensing crypto tokens.
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These digital asset service providers should also not engage external parties, such as social media influencers, to promote their crypto-based offerings to people in Singapore.
They can, however, continue to market or advertise on their own corporate websites, mobile applications or official social media accounts.
“The trading of cryptocurrencies is highly risky and not suitable for the general public,” Loo Siew Yee, MAS assistant managing director for policy, payments and financial crime, said in a press statement on Monday.
“DPT service providers should therefore not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, nor engage in marketing activities that target the general public,” she added, referring to digital payment tokens, which Singapore’s central bank uses as a broad classification to cover cryptocurrencies such as bitcoin, ethereum and similar assets underpinned by blockchain technology.
Singapore-based Foris DAX Asia, which operates the crypto.com trading platform, has been promoting its portal in movie theatres in the city-state. The company even splashed out to hire American actor Matt Damon to front its ads.
Across multiplex screens in Singapore, the Hollywood star has appeared in a promotional video uttering the tagline “fortune favours the brave” for crypto.com before movies start.
According to MAS guidelines, such advertisements should no longer be used in public venues to market the wares of DPT players.
“The Monetary Authority of Singapore (MAS) requires us to provide this risk warning to you as a customer of a digital payment token (DPT) service provider,” a disclaimer on crypto.com reads. “Please note that you may not be able to recover all the money or DPTs you paid to Foris DAX Asia Pte Ltd if Foris DAX Asia Pte Ltd business fails.”
While there is no specified penalty should crypto service providers fail to follow the guidelines, the financial regulator is likely to take note of digital asset companies that ignore the public safeguards, which may in turn affect whether they are allowed to continue operating legally in Singapore.
While the marketing framework came into effect on January 17, DPT players are being given some leeway to wind down any advertising efforts that run contrary to the guidelines, for instance if certain contractual obligations need to be fulfilled.
Singapore’s central bank is taking a similar stance on the matter to the UK, where the advertising watchdog has moved to clamp down on “misleading” marketing carried out by crypto players. The city-state’s guidelines also come as regulators across jurisdictions tighten scrutiny of the emerging crypto sector, which is known for operating across borders and away from regulatory oversight.
But for crypto players, the move by the MAS to curtail their ability to target Singaporean customers adds to the difficulty many of them already face operating in the city-state.
These businesses have raced to set up in Singapore in the past few years to leverage its status as a prominent hub for the growth of financial technology services. They run the spectrum from exchange platforms for trading crypto, to investment managers and financial advisers looking after digital asset portfolios for the wealthy. Authorities, however, have set a high benchmark for granting licences, with only a handful awarded so far.
Under Singapore’s Payment Services Act, businesses that provide offerings relating to DPTs are regulated primarily for money laundering and terrorism financing risks, as well as technology risks.
To operate legally, they need to apply for licences in the area of “digital payment token services”. Since the Act took effect in January 2020, there have been about 180 applications for permits for such services.
But only five of these have been awarded in-principle approvals, the MAS said. Sixty DPT applications were withdrawn, while three have been rejected. This failure rate comes in stark contrast to the image cast of Singapore as a crypto-friendly location relative to other jurisdictions such as China, which has banned the digital asset.
In view of the rapidly changing landscape for the industry, the MAS said it would continue to review the provision of DPT services to the public by providers and may update these guidelines as necessary.
The regulator had asked crypto stakeholders and the Singapore FinTech Association, a lobby group for tech-based financial businesses in the city-state, for feedback on the guidelines before they were published.
The SFA said in a statement that the new framework demonstrates that Singapore continues to see blockchain and cryptocurrencies as innovations that have the potential to gain mass adoption in the community, acknowledging that such adoption should be “balanced with pragmatic guardrails”.
“The technology behind blockchain has the potential to open many exciting opportunities for the industry and bring benefits to consumers,” said Shadab Taiyabi, president of the SFA. “Opening the doors to innovation also requires a system of checks and balances to be put in place before consumers gain full awareness and understanding of the new tools.”
A version of this article was first published by Nikkei Asia on January 17 2022. ©2022 Nikkei Inc. All rights reserved