There is international institutional investor interest, for example from hedge funds and asset managers, in payment tokens such as Bitcoin and Ether. These institutional investors have a need for a regulated product to gain and hedge their exposure to the payment tokens. MAS’ proposal will allow Approved Exchanges in Singapore to meet the need of investors to manage their exposure to payment tokens while bringing the activity under regulatory oversight.

Payment tokens and their derivatives are, however, not suitable for most retail investors. These tokens tend to have little or no intrinsic value, are difficult to value, and exhibit high price volatility. Retail investors are advised to exercise extreme caution when trading in payment tokens and their derivatives; they could lose the whole amount put in and more. MAS will require Approved Exchanges and licensed intermediaries to include risk warnings tailored to payment token derivatives in informational materials provided to investors. Additional margins will also be collected from retail investors to introduce more friction in the trading of leveraged payment token derivatives and partially mitigate the risk of losses.