MAS Has Increased Crypto Collateral Requirements Up 1.25:1 To Heal Risk

Key Points:

• The MAS has increased the collateral requirements for risky assets such as cryptocurrencies from 1:1 to 1.25:1.
• This is the latest attempt to protect crypto investors from market crash risks.
• The collapse of FTX has also caused many Singapore-based companies to suffer heavy losses and even go bankrupt.

In an effort to protect investors in the crypto market, MAS has increased the collateral requirement for risky assets such as cryptocurrencies from 1:1 to 1.25:1.

This means that for every dollar of crypto, financial institutions need to hold $1.25 in regular cash to ensure that there are enough reserves to cover losses or other problems.

In a recent statement, Tharman Shanmugaratnam, Senior Minister of the Monetary Authority of Singapore (MAS), explained that until the framework is finalized, MAS requires Singapore-registered banks to accept 1,250 % for high-risk crypto assets like Bitcoin and Ethereum.

“Pending the finalization of the framework, MAS requires Singapore-incorporated banks to apply a 1,250 percent risk weight for exposures to riskier crypto assets such as bitcoin and ether. Based on MAS’ minimum total capital adequacy requirement of ten percent for systemically important banks incorporated in Singapore, Singapore-incorporated banks are required to hold $125 of capital against an exposure of $100 to a crypto asset like bitcoin.”

He said.

According to MAS, the minimum capital adequacy ratio requirement for systemically important banks established in Singapore is 10%, which means for every $100 of crypto asset exposure held by banks holding, they must have $125 of capital.

“For less risky crypto assets, such as tokenized corporate bonds that meet a set of conditions to ensure that they pose the same level of financial risks as traditional corporate bonds, the prudential treatment is similar to that of the conventional non-tokenized asset. “

Shanmugaratnam further stated.

Singapore is also one of the countries witnessing quite severe consequences in the recent collapse of the mighty FTX empire. The company collapsed in mid-November and has created huge ripples through the crypto arena. The company has caused many other companies, such as Block Fi, to be badly affected and file for bankruptcy.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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