Crypto Over-The-Counter (OTC) trades

Yes, providing any platform to facilitate OTC crypto trading will likely be considered providing a digital payment token (DPT) service regulated under the Payment Services Act.

"The PSA now regulates entities offering any of the following DPT-related services as digital payment token service providers:

• Buying or selling DPTs;
• Establishing or operating a DPT exchange; and
• Participating in and offering financial services related to the offer and/or sale of a DPT by an issuer.
• Transfer or transmittal of DPTs from one DPT address to another
• Inducing (or attempting to induce) any person to buy or sell DPTs (without the DPT service provider actually accessing any money or DPTs)"

Source: Sygna

According to MAS (Payment Services Act – First Schedule),
last revised 31 December 2021

“digital payment token service” means any of the following services:

(a) any service of dealing in digital payment tokens (other than any such service that the Authority may prescribe);
(b) any service of facilitating the exchange of digital payment tokens (other than any such service that the Authority may prescribe);

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"dealing in”, in relation to any digital payment token, means the buying or selling of that digital payment token in exchange for any money or any other digital payment token (whether of the same or a different type), but does not include any of the following:

(a) facilitating the exchange of digital payment tokens;
(b) accepting any digital payment token as a means of payment for the provision of goods or services;
(c) using any digital payment token as a means of payment for the provision of goods or services;

Yes. MAS plans to regulate crypto derivative products offered to institutional investors, which will be listed and traded on approved exchanges and will be subject to the regulatory requirements and supervisory oversight under the Securities and Futures Act (SFA). Additional regulations may also apply under the PSA, including compliance with AML/CFT regulations.

Crypto derivatives are derivatives contracts, such as futures, options, or contracts for differences (CFD), that reference cryptocurrencies as the underlying asset. In 2020, MAS announced plans to regulate crypto derivatives on approved exchanges under the SFA. However, MAS indicated that it does not plan to regulate all crypto derivatives because it does not want to legitimize all such assets, particularly with regard to retail investors. Instead, MAS will only regulate and authorize crypto derivatives on approved exchanges to be offered to institutional investors.

In lieu of regulations on crypto derivatives offered to retail investors, MAS will continue to warn retail investors of the inherent risks and speculative nature of crypto derivatives that remain unregulated, apart from any digital payment regulations and AML/CFT rules under the Payment Services Act (PSA).

Under this system, according to MAS, “retail investors forgo the regulatory safeguards under the SFA when they trade with unregulated entities and do so at their own risk.” MAS will instead increase its consumer education efforts, such as “Money SENSE,” to warn retail investors of the high risk involved in crypto derivatives and “discourage retail investors from trading with unregulated entities which could be fraudulent.”

While MAS has adopted a “buyer beware” approach to retail investors, MAS has also issued circulars to financial institutions requiring them to comply with additional measures if they offer crypto products to retail investors. Some of these include requirements to warn retail investors of the risks involved in crypto derivatives, limitations on advertisements and additional margins to be collected from retail investors to mitigate the risk of large losses.

Currently, Singapore has four approved domestic exchanges for crypto derivatives regulated under the SFA. These include Asia Pacific Exchange, ICE Futures Singapore, Singapore Exchange Derivatives Trading, and Singapore Exchange Securities Trading Limited. Additional exchanges have applied for the necessary licenses from MAS to conduct these activities.

As of 2021, crypto derivatives on approved exchanges remain relatively limited. Cryptocurrency derivatives traded through financial institutions in Singapore currently amount to less than 1% of all derivatives trading activity on SGX.