Singapore disavowed collapsed cryptocurrency project Terraform Labs, saying the platform was not performing activities requiring a license from MAS and was not licensed or exempt from a license by the regulator. The city-state also downplayed the impact of the Terraform Labs saga on its financial systems.
In response to a question from an MP, Lawrence Wong, Deputy Prime Minister, Minister of Finance and Chairman of MAS, said the collapse of Terraform Labs raised concerns about regulatory oversight and investor protection in the cryptocurrency market. This event has prompted the Singaporean authorities to re-evaluate and strengthen regulations to mitigate risks in this sector.
Strengthening regulatory measures
In response to the incident, MAS implemented several measures to strengthen the regulatory framework for cryptocurrency investment companies operating in Singapore. These measures aim to enhance consumer protection and mitigate the risks associated with cryptocurrency trading.
MAS stated: “We also remind those who trade cryptocurrencies that MAS rules and regulations cannot prevent monetary losses arising from such activities. Consumers should be aware of the risks of doing so and understand that cryptocurrencies are highly volatile and have no intrinsic value.”
MAS has introduced new measures focused on retail consumers, in line with international standards for regulating crypto assets. These measures include assessing customers' awareness of risks before granting access to trading, prohibiting incentivized trading offers, and restricting the provision of credit or leverage to consumers.
In addition, MAS has imposed business conduct requirements on cryptocurrency platforms to ensure appropriate segregation and preservation of client assets, mitigate conflicts of interest, and implement risk management processes. These enhanced measures will be implemented in phases starting this year.
Educational awareness
MAS stressed the importance of consumer awareness regarding the risks of trading cryptocurrencies. While regulation can mitigate some risks, consumers should understand the volatile nature of cryptocurrencies and their lack of intrinsic value. Ultimately, investors bear responsibility for their investment decisions in the cryptocurrency market.
Meanwhile, the SEC is seeking $5.3 billion from Terraform Labs and its co-founder, Do Kwon. The order, which includes restitution and civil penalties, follows a court ruling that found Terraform and Kwon guilty of fraud.
The SEC's motion, recently filed in the U.S. District Court for the Southern District of New York, outlined the regulator seeking $4.7 billion in default and prejudgment interest from bankrupt Terraform Labs. Additionally, the SEC is seeking civil penalties totaling $520 million, with $420 million directed at Terraform and $100 million directed at Kwon.
In response, legal representatives for Terraform and Kwon proposed much lower penalties, proposing a maximum of $3.5 million for Terraform and $800,000 for Kwon. The court is expected to issue its ruling on this request.
This article was written by Jared Kirroy at www.financemagnates.com.