MAS Considers Allowing Crypto Derivatives on Regulated Exchanges

The contracts will be for institutional and retail investors, although the latter is slated to pay a higher price.

The Monetary Authority of Singapore (MAS), the country’s central bank and financial regulatory authority, is working to allow derivatives trading of cryptocurrency tokens like Bitcoin (BTC) and Ether (ETH) on approved exchanges in the country, according to a consultation paper that the agency published on Wednesday. The news was reported in the Business Times of Singapore

According to the report, the intention behind the introduction of these derivative products is “for institutional investors to gain and hedge their exposure to the payment tokens.” The derivatives will be available on approved exchanges, including the Asia-Pacific Exchange (APEX), the Singapore Exchange Derivatives (SGX), and ICE Future.

Crypto derivatives will be more expensive for retail investors

However, MAS reportedly said in a press release that it does not view crypto token derivatives as suitable for trading by retail investors. The regulator also said that cryptocurrency tokens have little to no intrinsic value and have high price volatility.

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Still, retail investors will have the ability to trade these derivatives contracts, although they will allegedly have to pay a higher price.

“Come June 30 next year, retail investors will need to pay 1.5x the standard amount of margin required for contracts offered by the approved exchanges, subject to a floor of 50 per cent,” the report explains.

The report went on to provide an example depicting a single contract for 1 BTC worth $10,000: “if the margin required for payment token derivatives by the exchange is fixed at 40 per cent of the contract size, retail investors will need to pay S$6,000 instead of the S$4,000 institutional investors pay.”

The margin is still, however, subject to a 50 percent floor, meaning that retail investors will still have to pay 50 percent of the margin fee–whichever price is higher. The regulator will be accepting public commentary on the regulation until December 20.

MAS dives deeper into DLT and crypto

Finance Magnates reported earlier this month that MAS partnered with JP Morgan Chase and Temasek to build a blockchain-based prototype multi-currency payments network.

The collaboration is the latest part of “Project Ubin,” a collaborative effort between MAS and industry partners that explores the use of Distributed Ledger Technology.

The network will be developed as the project’s fifth phase, allowing other blockchains to connect and integrate seamlessly. The platform will also offer features including delivery-versus-payment (DvP) settlement with private exchanges, conditional payments, and escrow for trade, as well as payment commitments for trade finance.

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