Regulatory Response and Impact Assessment Following Terraform Labs' Collapse

Mr Yip Hon Weng asked the Prime Minister since the collapse of Terraform Labs, a Singapore-registered startup behind the Terra stablecoin (a) how have regulations been strengthened for cryptocurrency investment firms operating in Singapore; (b) how will such companies be prevented from operating before obtaining a license from the Monetary Authority of Singapore (MAS); (c) how has Terraform Labs' collapse impacted Singapore's reputation; (d) what measures are being considered to prevent similar occurrences; and (e) whether the Government has conducted a review to identify and address any vulnerabilities arising from this case.

Terraform Labs Pte Ltd, the Terraform Labs entity incorporated in Singapore, was not performing activities requiring a licence from the Monetary Authority of Singapore (MAS) and was, consequently, neither licensed nor exempted from licensing by MAS.

As previously shared in Parliament, spillovers to the mainstream financial system and the economy from the collapse of the TerraUSD stablecoin were limited. MAS' surveillance shows that key financial institutions in Singapore have insignificant exposures to cryptocurrency and crypto players.

Nevertheless, the turmoil that resulted from the collapse of the TerraUSD stablecoin demonstrated the highly risky and speculative nature of cryptocurrencies. Since 2017, MAS has consistently warned the public about the risks of speculating in cryptocurrencies and in January 2022, restricted advertising of cryptocurrency services in public spaces.

Last year, in line with international standards on regulating cryptoassets, MAS introduced consumer access measures focused on retail consumers. These measures include requiring cryptocurrency platforms to determine a customer's awareness of risks before accessing trading services, prohibiting any offer of incentives that would entice consumers to trade and prohibiting the provision of credit or leverage to consumers that could magnify losses suffered. MAS also introduced business conduct requirements on cryptocurrency platforms to have proper segregation and custody of customers' assets, assess and mitigate conflicts of interests and implement adequate risk management processes. The enhanced measures will be effected in phases, starting from this year.

We also remind those who trade cryptocurrencies that MAS' rules and regulations cannot prevent monetary losses arising from such activities. Consumers must be aware of the risks of doing so and understand that cryptocurrencies are highly volatile and have no intrinsic value.