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The risks you are exposed to when trading in cryptocurrencies and their derivatives
Investing

09 Nov 2021 | 2 min. read

Cryptocurrencies and their derivatives are highly risky products, and there are no MAS regulations that protect your money or cryptocurrencies. Find out what dangers you are exposed to when trading in such products.

Key takeaways
  • Cryptocurrencies and their derivatives are unregulated, except for cryptocurrency derivatives which are listed on Approved Exchanges licensed by the MAS.
  • If you trade in unregulated products, MAS is unable to help you if you face difficulties in recovering your assets such as cryptocurrencies and monies, or become a victim to unfair or manipulative practices.

Cryptocurrencies, also known as digital payment tokens or DPTs, are tokens which may be used to pay for certain goods and services.

Examples of such tokens include Bitcoin, Ether, and Litecoin. These tokens are not legal tender.

MAS licenses companies that offer services to:

  • change money into cryptocurrency,
  • change cryptocurrency into money, or
  • exchange one type of cryptocurrency for another, including providing trading services, brokerage services, operation of a market or platform that allows customers to trade with each other.

These companies are licensed by MAS to address the risks of money laundering and financing of terrorism. They are not required to put in place measures to safeguard consumers’ money or cryptocurrencies.

Therefore, if you trade in cryptocurrencies, you would not be protected by MAS’ regulations, even if the company you are dealing with is licensed by MAS. You may not be able to recover any of the cryptocurrencies or monies that you deposited with the service provider if 

  • they are stolen or lost due to hacking of your account, misappropriation, or
  • the service provider is going bankrupt, or
  • you encounter problems withdrawing funds from the DPT service providers.

In addition to these risks, DPTs are not suitable for retail investors because they have no intrinsic value and are subject to sharp price swings driven by speculation. Find out more about the risks of cryptocurrencies here.

Crypto derivatives are derivatives contracts, such as futures, options, or contracts for differences (CFD), that reference cryptocurrencies as the underlying. These products may be offered by CFD brokers and DPT service providers.

Currently, MAS’ regulations on crypto derivatives only apply to those listed on Singapore Approved Exchanges.

If you trade in crypto derivatives that are not listed on Approved Exchanges, the money you deposited for trading in these derivatives is not protected by MAS’ regulations.

Should things go awry, you may not be able to recover your money, and you would not be protected by MAS’ regulations, even if the company you are dealing with is licensed by MAS.

 

Last updated on 10 Nov 2021