Yesterday, the Monetary Authority of Singapore (MAS) responded to questions from a Singaporean Member of Parliament (MP) about exposure to crypto assets following the FTX collapse. MAS said that current bank exposures to crypto assets were just 0.05% of total weighted assets.

It is widely known that the largest bank in Singapore, DBS, has launched a digital asset exchange. However, proceed cautiously and it is only available to institutions and wealthy clients.

The Basel III rules for crypto assets are currently in the proposal stage and have gone through two rounds of consultation, with final rules expected soon.

MAS stated that banks must hold $125 of capital against $100 exposure to a crypto asset like Bitcoin. That’s even higher than banks in the United States because Singapore imposes a minimum capital adequacy requirement of 10% compared to Basel’s standard of 8%. That international standard translates to a one-for-one capital requirement.

Therefore, cryptocurrencies are treated as the riskiest assets possible.

These high capital requirements apply mainly to cryptocurrencies. Tokenized securities, such as stocks and bonds, are treated similarly to conventional assets under the proposed Basel rules, although they carry a 2.5% surcharge.

Meanwhile, banks globally are pulling back against the overall cryptocurrency exposure limit of 1% of Tier 1 capital. It has been estimated that the exposure of systemically important banks globally cannot exceed $20 billion. combined.

The other contentious requirement is to treat custody of digital assets as equivalent to the exposure if the bank held the assets on its balance sheet.

Singapore Parliamentary Questions on FTX

Yesterday, 14 Singaporean MPs submitted numerous questions about the FTX collapse. Some queries were about how many retailers were exposed, the total amount, and what could be done to further educate consumers about the risks. They also wanted to know about the safeguards that could be placed on cryptocurrency companies.

Other MPs wanted to know about Temasek’s investment in FTX: he recently wrote off $275 million. For example, MPs wanted to know about accountability and whether publicly announced cryptocurrency risks were also promoted to government investment funds like Temasek and GIC.