Byline: Hannah Parker
Photo by: Joshua Ang on Unsplash
The Monetary Authority of Singapore (MAS), the city-state’s de-facto central bank, has released a revised regulatory framework for stablecoins. This is aimed at ensuring stability for single-currency stablecoins (SCS) regulated in Singapore, making it among the first jurisdictions to do so globally.
On August 15 2023, the MAS announced its framework for regulating stablecoins following a public consultation in October 2022 on the overall regulatory approach for intermediation activities and stablecoin-related issuance. The central bank’s new rules will apply to any single-currency stablecoins (SCS) pegged to the Singapore dollar or any G10 currencies issued in Singapore, including the euro, United States (US) dollar and British pound.
Views on the Matter
Unlike other volatile cryptos such as Bitcoin (BTC) and Ethereum (ETH), stablecoins are digital payment tokens pegged to legal tender like national currencies and maintain a constant value. A separate document responding to stablecoin consultation mentioned that the MAS had carefully considered the feedback received and incorporated it where appropriate.
It was emphasised that the paper represented MAS’s finalised regulatory approach towards stablecoins in Singapore. Moreover, the central bank highlighted that only stablecoin issuers who fulfilled all requirements under the framework, including value stability and maintaining minimum base capital, can apply to MAS to receive a label called MAS-regulated stablecoins. Deputy Managing Director at MAS, Ho Hern Shin, encouraged SCS issuers who wish their stablecoins to be recognised by the central bank to make early compliance preparations.
Shin said: “MAS stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange and as a bridge between the fiat and digital asset ecosystems.” Vice President of Strategy and Policy of APAC at Circle, Yam Ki Chan, said: “With the new stablecoin regulatory framework, MAS is amongst a set of forward-looking regulators globally in establishing a clear and transparent regulatory framework for stablecoins and digital assets.”
Critical Requirements for MAS framework
The framework outlines several requirements for stablecoin issuers, including reserve management, capital requirements, redemption timelines and disclosures per MAS:
- Value stability: Reserve assets will be subject to conditions to give a high degree of assurance of value stability.
- Capital: Stablecoins must be held in low-risk and high-liquid assets to reduce the risk of insolvency and enable an orderly wind-down of business if necessary.
- Redemption timeline: Stablecoin issuers must return the par value of the digital currency to holders within five business days of a redemption request.
- Disclosure: Issuers must provide appropriate disclosures to users, including information on the SCS’s value stabilising mechanism, holder’s rights, and the audit results of reserves.
These rules will apply to stablecoins issued in Singapore, and stablecoin issuers that fulfil these requirements can apply to become MAS-regulated to distinguish them from non-regulated stablecoins by users. MAS emphasised that those representing a MAS-certified token would be subject to penalties, including fines and imprisonment and being added to an alert list.
MAS’s Stablecoin Regulatory Framework Scope
Singapore has sought to position itself as a digital currency hub with the revised regulatory framework that accounts for feedback from a public consultation from October last year. Several respondents suggested that MAS expand the scope of stablecoins regulated under the SCS framework in the future, considering developments in the stablecoin landscape and the risks posed by stablecoins.
Some responders mentioned that the framework was restrictive because it did not include other prominent currencies. The bank stated:
“The restriction to SGD and G10 currencies within the SCS framework takes into consideration the availability of high-quality liquid assets in those currencies that would be fundamental to providing a strong reserve backing for SCS.”
Singapore’s background in the crypto space
On June 7 2023, experts from 7Bitcoins mentioned that a stablecoin issuer, Circle, received a digital token licence in Singapore after obtaining in-principle approval in November last year. The licence issued by MAS enabled Circle to offer digital payment token services, cross-border money transfer and domestic money transfer services in Singapore.
Singapore is establishing regulatory frameworks for stablecoins amid criticism from the crypto industry towards the US regulatory regime. According to the report, the US has yet to develop a set of regulations or comprehensive framework that allows blockchain and crypto companies to function without fear of being targeted by regulators. However, a bill for such a framework in the US is currently going through Congress.
For the framework to be enforced, the Monetary Authority of Singapore must hold consultations, and the parliament must pass the amendments. This new stablecoin framework puts Singapore among the first jurisdictions to have such rules.
