The local cryptocurrency scene was abuzz on Jan 17, when the Monetary Authority of Singapore(MAS) announced guidelines which prevents cryptocurrency or digital payment token (DPT) service providers from promoting or advertising themselves to the general public.
While some commend MAS’s effort in discouraging the general public from trading highly risky DPTs, others contacted by The Edge Singapore say they are bewildered by the announcement and unaware of the impending guidelines prior to the official release.
“The guidelines were a surprise to us,” says a senior executive at a DPT firm. “In effect, they hamper crypto players’ ability to do any form of advertising, including conducting educational marketing campaigns in Singapore.”
According to the guidelines, DPT service providers should not promote or advertise their services in public areas in Singapore, such as through commercials on public transport, public transport venues, public websites, social media platforms, broadcast and print media, or provision of physical ATMs.
The guidelines also include advertisement through the engagement of third parties such as social media influencers to promote DPT services to the general public in Singapore.
The DPT firm senior executive says the cryptocurrency space is an extremely competitive landscape, where homegrown companies are already struggling to compete against globally established unregulated players.
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“Barring local crypto players from advertising in Singapore will hamper our ability to compete for customers, and significantly worsen the already uneven playing field between local exchanges and overseas exchanges that aren’t subjected to MAS’s rules as they can continue to advertise their products online in Singapore,” he adds, referring to large global exchanges which still facilitate customers in Singapore despite not having physical presence in the city-state.
A cryptocurrency advocate who is with a local DPT firm says he is astonished by the strict guideline as he expected the central bank to take a gradual approach. He points out that the UK, for example, has begun consulting on a proposed framework to crack down on cryptocurrency ads and misleading claims since 2020.
However, Antonio Fatas, professor of economics at global business school Insead, says the MAS announcement may not have a large impact on the existing DPT players in Singapore, as most of them are not here for the local market. “Most of them look for a home that is friendly to them from a regulatory point of view and hopefully reach other markets from Singapore, if they can bypass the regulations in those markets,” says Fatas.
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A blunt instrument
In Singapore, DPT players had been promoting actively on social media, certain physical advertising platforms, as well as through third-party partners and applications. The new guidelines means that many DPT players will now have to rethink their advertising activities.
Crypto exchange platform Luno, for example, says in a statement that it is in the process of reviewing the new guidelines and will in due course take any necessary steps in relation to them.
“The crypto market is fast-evolving, so its longterm success is reliant upon open communications between businesses like ourselves and the regulators. We do our part to ensure consumers can interact safely and securely in the crypto environment and look forward to working with the MAS and the industry more broadly to ensure the guidance in this area promotes a safe environment for consumers without being unduly restrictive to business,” the company says.
Sherry Goh, its global expansion manager and country manager for Singapore, says the company is “extremely grateful” to its partners who have taken reasonable and swift actions in supporting its next steps after the announcement.
“Conversations have been very constructive and we look forward to continuing working with them to build the right guardrails to support consumers in embarking on their crypto journey safely, responsibly and in a well-informed manner,” she adds.
Similarly, Independent Reserve, one of five licensed cryptocurrency firms in Singapore, is also re-evaluating its marketing efforts in the city-state to ensure that its future programmes are aligned with the MAS guidelines.
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“The extent to which the new guidelines will impact the industry remains to be seen,” says Raks Sondhi, Independent Reserve managing director for Singapore. “At Independent Reserve, the retail segment in Singapore does not represent our entire business. Our stakeholders range across a multitude of various other segments such as institutions, family offices, high-net-worth investors, accredited investors and institutions, for instance.”
Meanwhile, founder and CEO of compliance consultancy firm Ethikom Nizam Ismail says the “concerns” by regulators on cryptocurrency volatility is understandable. However, he believes that the reaction to that should not have been a “blunt instrument”.
“The key issue should be regulating the content of the advertising — that DPT companies should not make statements that are false or misleading or belittle the risk of cryptocurrencies.
This is consistent with the approach taken by MAS for other asset classes, such as capital market products. The ban on promotions by DPT service providers seems peculiar and antithetical to the aspirations of Singapore to become a blockchain and FinTech hub,” says Nizam.
A different approach
In its announcement, Loo Siew Yee, MAS assistant managing director of the policy, payments and financial crime group, said MAS strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases. However, the trading of cryptocurrencies is highly risky and not suitable for the general public.
Bryan Tan, who heads the tech practice at law firm Pinsent Masons Singapore, says the intent behind the guidelines seem to be to restrict retail customers from being overly exposed to crypto trading. Under that assumption, it would mean that non-trading activity would still continue to be unaffected.
“For instance, a business which accepts crypto for its goods and services should be able to continue to advertise that fact, as would businesses that run token-based loyalty programs. What is clear is that crypto exchanges cannot advertise publicly or engage social media influencers. A little more grey would be those falling in-between, such as crypto-based credit cards,” says Tan.
In response to MAS’s stance on blockchain innovation versus cryptocurrency trading, Nizam says blockchain and cryptocurrencies could not be separated. “That is a false narrative — the two are intertwined. The economic usage of blockchain is oftentimes intrinsically tied to the cryptocurrencies,” says Nizam.
The more appropriate approach, Nizam says, is to have in place a business conduct regime for payments and cryptocurrency firms. Compared with the extensive regulations that exist under the Securities and Futures Act and Financial Advisers Act, there are gaps in the Payment Services Act — which DPT players need to comply with — when it comes to product or client suitability that will squarely address the issue of mis-selling cryptocurrencies to vulnerable groups.
For instance, apart from prescriptions on advertising, there are rules on product and client suitability, the selling process of investment products, an enhanced regime for higher-risk investment products and the need for customer knowledge assessment, among others.
“There are very high-risk investment capital markets products such as contracts for differences and derivatives, but we don’t see a promotion ban on these products. Fundamentally, there should not be a bifurcated approach across different financial products,” says Nizam.
Echoing the DPT players, Nizam says it is disappointing that there was no public consultation on the guidelines. “We understand that the MAS had consultation with the Singapore FinTech Association payments committee but there are hardly any meaningful representations from the crypto players. There should have been a public consultation, given that there was material impact on some sectors. For instance, operators of public crypto ATMs have to effectively cease business.”
