MAS

WFE Commends Singapore’s Approach to Crypto Trading

WFE Following the Monetary Authority of Singapore’s (MAS) Consultation Paper on Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens (crypto assets), the World Federation of Exchanges (WFE) outlined the roles of both the exchange and CCP in the trading and clearing of derivatives contracts.

The response notes that established exchanges offer a venue whereby exchange-traded and centrally cleared derivatives are subject to pre- and post-trade standards, set by the exchange listing and the CCP clearing the trades.

As Singapore’s financial watchdog plans to recognize established regulated market infrastructure as the appropriate market operators to conduct, and instill, the high standards required for the trading of crypto asset-based derivatives contracts, the WFE commends the approach but recommends greater clarity on how third-country recognition processes might function to enable third-country market infrastructure to trade Payment Token Derivatives.

The WFE also encourages the MAS to keep the restrictions placed on trading with retail investors under review as the market evolves and matures in the stability of its trading environment. This would also enable the MAS to respond to and adopt any forthcoming global regulatory approach to crypto asset regulation.

In addition, the WFE suggests that trading platforms which do not fall within the high regulatory standards associated with established market infrastructure should be banned or restricted from offering Payment Token Derivatives products to institutional or retail investors, to ensure greater investor protection, and to avoid undermining the additional processes, safeguards and extra investment required by WFE members, due to their systemic importance as central market infrastructure.

Nandini Sukumar, Chief Executive Officer of WFE, said: “The WFE welcomes the decision of the MAS to allow Payment Token Derivatives to be traded and cleared by established market infrastructure venues. This is exactly what regulated market infrastructure is for: enabling price discovery in innovative new products and markets and supporting the relevant post-trade requirements. However, the ability to trade openly on international markets is the cornerstone of what the WFE stands for and seeks to promote. As such, we would support the MAS if it were to ensure that all established international market infrastructures that operate the high standards required, are able to trade these products.”

In October 2019, the WFE asked the Financial Conduct Authority, the UK’s regulatory authority, not to ban the sale of crypto derivatives to retail consumers while agreeing and supporting the regulator’s desire to better protect vulnerable consumers.

The institution said that options to mitigate excessive risk exposure for retail consumers should be pursued alongside the potential introduction of ‘standards’ for such products, particularly as the crypto market is evolving and maturing. Should it be implemented, the ban should be reviewed as the market evolves. in order to ensure consumer choice and access and to avoid international market fragmentation, particularly if international standard setters introduce a new global regulatory approach to the regulation of crypto
assets.