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Bitcoin-Friendly Singapore Considers Approving Crypto Derivatives Trading

  • Singapore has released the consultation paper on the proposed Bitcoin derivatives.
  • Retail investors might not be allowed to trade in the crypto products.
  • The Monetary Authority of Singapore says the move is driven by demand.

Singapore’s central bank could soon authorize the trading of derivatives referencing cryptocurrency assets such as Bitcoin and Ethereum. As part of the preliminary plans being undertaken, the Monetary Authority of Singapore has released a consultation paper seeking views from interested parties.

Per the central bank, the move to license cryptocurrency derivatives stems from a demand for well-regulated crypto derivative products.

If the central bank goes ahead with the initiative, the crypto derivatives will only be based on payment tokens. To qualify for a license as a Payment Token Derivative, a crypto asset must be listed and traded on a Singapore-approved exchange.

Mom-and-pop Bitcoin traders might be turned away

The Singaporean central bank has however indicated that the crypto derivatives might not be made available to all Singaporeans. This is in following a trend that has been set by other financial regulators.

A little over a year ago, for instance, the UK’s Financial Conduct Authority stated that it was considering a ban on the sale of derivatives referencing cryptocurrencies to retail investors. The FCA argued that retail investors weren’t sophisticated enough.

In its consultation paper, the MAS has also signaled that it holds misgivings about allowing retail investors to trade in Payment Token Derivatives. The Singaporean central cites the high volatility that crypto-assets experience and the massive losses that are likely to be incurred in case such investors open highly leveraged positions:

In general, MAS does not view Payment Token Derivatives to be suitable for most retail investors to trade. This is because the underlying payment tokens tend to exhibit high volatility and are intrinsically difficult to value … Losses are also amplified due to the leveraged nature of derivatives, and investors may even lose more than the whole amount they had put in.

What BitMEX has taught Singapore

With some retail traders using the maximum leverage ratio of 1:100 at times, the losses have been massive especially when Bitcoin makes sudden moves.

In September, for instance, CCN reported that Bitcoin long positions worth $0.8 billion had been liquidated on crypto derivatives trading platform BitMEX. The first occurred on September 19th when long positions worth $150 million were liquidated.


Five days later long positions of Bitcoin worth $651 million were also liquidated.