The Monetary Authority of Singapore Proposes Regulatory Boost for Decentralized Exchanges

August 7, 2018

The Monetary Authority of Singapore (MAS), the city-state’s de facto central bank, is proposing changes to existing regulations that would limit market entry for decentralized exchanges based on blockchain.

According to a published consultation paper, MAS stated that the current single-tier regulatory framework of “recognized market operators” (RMO) is not able to meet demand for new business models based on such cutting-edge technologies. To address the issue, the MAS proposes to introduce a three-tier structure in an effort to decrease market access for exchange platforms having small-scale

The MAS write in the paper “MAS has observed the emergence of new business models in trading platforms, including trading facilities that make use of blockchain technology, or platforms that allow peer-to-peer trading without the involvement of intermediaries,” and “As the current RMO regime has been in place since 2002, it is timely to review to the regulatory framework for market operators to ensure that it continues to meet the demands of the changing landscape.”

Primarily, tier 3 of the proposed framework applies to market operators that are considerably smaller than established exchanges and intends to allow blockchain, P2P technology, services implementation in a supervised environment.“This new tier is designed to facilitate new entrants that develop solutions for wholesale market participants, or market operators that have reached the end of their sandbox tenure and are commercially viable, but whose businesses are not able to meet the requirements of the existing RMO regime,” explained the MAS.

The MAS currently supervises the exchange market under two categories including approved exchanges (AE) and recognized market operators (RMOs). The former applies to “systemically-important” platforms which are accessible to retail investors such as Singapore’s stock exchange.

On the other hand, if the proposal is enacted, the RMO framework also allows regulation of other exchanges including those for commodities and derivatives trading, which would fall under the new proposal’s tier 2.

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