SINGAPORE - Vulnerabilities in the crypto ecosystem could pose material risk to financial stability worldwide, including in Singapore, if its linkages with the traditional financial system increase in time, said Singapore’s central bank on Friday.
Thus, cryptocurrencies, digital assets and the technologies that underpin them warrant heightened surveillance, the Monetary Authority of Singapore (MAS) said in its Financial Stability Review (FSR) 2022.
This isn’t the first time MAS has raised the red flag on crypto. It telegraphed its concerns in FSR 2021 and has taken several steps since then to avoid any potential financial disruption and protect local investors.
Some of those concerns were borne out this year with the meltdown of the global crypto market.
By October 2022, the market capitalisation of crypto firms fell to around US$900 billion ($1.24 trillion), from a peak of US$2.8 trillion in November 2021.
The downturn began in April this year, when the United States Securities and Exchange Commission announced that they would begin to put regulations on crypto firms, setting the stage for a broad sell-off.
“Recent events, including the collapse of crypto exchanges, have also highlighted how the failure of a key crypto entity can lead to contagion within the crypt...