Singapore has introduced a revised regulatory framework to ensure stability for single-currency stablecoins (SCS) regulated in the country. The Monetary Authority of Singapore (MAS) announced the framework on August 15, targeting non-bank issued stablecoins pegged to the value of the Singapore dollar or G10 currencies such as the euro, British pound, and US dollar, with a circulation exceeding SGD 5 million ($3.7 million).
The framework aims to facilitate the use of stablecoins as a credible digital medium of exchange and as a bridge between fiat and digital asset ecosystems, according to Ho Hern Shin, the bank’s financial supervision deputy managing director.
Stablecoin issuers are encouraged to ensure compliance if they want their stablecoins to be labeled as MAS-regulated. The framework sets out several requirements for stablecoin issuers, including redemption timelines, disclosures, reserve management, and capital requirements.
In terms of value stability, reserve assets held by stablecoin issuers must fulfill requirements related to their composition, valuation, custody, and audit, to provide a high degree of assurance of value stability. Stablecoin issuers are also required to maintain minimum base capital and liquid assets to reduce the risk of insolvency and enable an orderly wind-down of business if necessary. Furthermore, issuers must return the par value of the stablecoins to holders within five business days from a redemption request.
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Disclosures play a vital role in the framework. Issuers must provide appropriate disclosures to users, including information on the stablecoin’s value stabilizing mechanism, rights of stablecoin holders, and the audit results of reserve assets.
MAS emphasized that only stablecoin issuers who meet the new framework’s requirements can apply to become MAS-regulated, which distinguishes them from non-regulated stablecoins in the eyes of users. The central bank warned that those who falsely represent a token as MAS-certified will face penalties outlined in the new framework, including fines, imprisonment, and being added to an alert list.
The revised regulatory framework has taken into account feedback from a public consultation held in October 2022. MAS will now need to conduct further consultations, and the parliament must pass amendments to enforce the framework.
This move by Singapore reflects the increasing focus of regulators on stablecoins, which have gained significant popularity in recent years. Stablecoins offer the advantage of minimizing volatility compared to other cryptocurrencies, as they are typically pegged to a stable asset, such as a fiat currency. However, concerns have been raised about their potential impact on financial stability and consumer protection. Regulatory frameworks like the one introduced by MAS aim to address these concerns and provide a clear regulatory framework for stablecoin issuers to operate within.
The MAS framework is also in line with global efforts to regulate stablecoins. The Financial Stability Board (FSB) and other international organizations have called for regulations to ensure the stability and resilience of stablecoins and to mitigate risks to financial stability. Singapore’s approach to stablecoin regulation adds to the evolving landscape of global regulatory frameworks for digital assets.
By introducing this regulatory framework, Singapore is demonstrating its commitment to fostering innovation and ensuring the integrity of its financial system. The framework provides stability and clarity for stablecoin market participants, allowing them to operate within a regulated environment. This regulatory approach is expected to boost confidence among users and investors, ultimately promoting the growth of the stablecoin market in Singapore.
In conclusion, Singapore’s central bank has released a revised regulatory framework aimed at ensuring stability for single-currency stablecoins regulated in the country. The framework establishes requirements for stablecoin issuers in terms of value stability, capital, redemption, and disclosure. Only stablecoin issuers that meet these requirements can apply to become MAS-regulated. This regulatory framework aligns with global efforts to regulate stablecoins and promotes confidence in the stablecoin market in Singapore.
