The Monetary Authority of Singapore (MAS) has finalised its regulatory framework for stablecoins, following a public consultation last October.
This framework seeks to ensure a high degree of value stability for stablecoins regulated in the city-state, and will apply to single-currency stablecoins (SCS) pegged to the Singapore dollar of any G10 currency that are issued in Singapore. Stablecoins are digital payment tokens (DPT) that maintain a constant value under one or more specified fiat currencies.
According to MAS’s release dated Aug 15, this framework will facilitate the use of stablecoins as a credible digital medium of exchange, and a bridge between the fiat and digital asset ecosystems.
MAS notes that any party looking to issue SCS will have to fulfil four requirements — value stability, capital, redemption at par and disclosure.
More specifically, this means that SCS reserve assets will be subject to requirements relating to their composition, valuation, custody and audit.
Issuers will also need to maintain a minimum base capital of $1 million, and have minimum liquid assets to reduce the risk of insolvency, and enable orderly wind-down of business if necessary.
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Issuers must also return the par value of SCS to holders within five business days from a redemption request, and must provide appropriate disclosures to users, including information on the SCS’ value stabilising mechanism, rights of SCS holders as well as the audit results of reserve assets.
Only stablecoin issuers that fulfil all requirements under the framework can apply to MAS to be recognised and labelled as “MAS-regulated stablecoins”, which will enable users to readily distinguish between those and other digital payment tokens.
The MAS says that Any person that misrepresents a token as an “MAS-regulated stablecoin”, may be subject to penalties under MAS’ stablecoin regulatory framework, and placed on MAS’ Investor Alert List.
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Stablecoins are treated as digital payment tokens (DPT) under the payment services act (PS Act) today. However, the MAS says that the current regulatory treatment under the PS Act is not adequate as it does not regulate to ensure that stablecoins maintain a high degree of value stability and any associated stabilisation mechanisms.
The MAS will work to introduce a new regulated activity of “Stablecoin Issuance Service” which will fall under the PS Act.
Ho Hern Shin, deputy managing director at MAS said: “We encourage SCS issuers who would like their stablecoins recognised as “MAS regulated stablecoins” to make early preparations for compliance.”
Globally, regulators have been working to quickly implement frameworks in their jurisdictions after the collapse of the terraUSD stablecoin in May 2022, causing nearly US$60 billion ($81.31 billion) to evaporate from markets.
The US is also looking to regulate such coins, with the US House Financial Services committee advancing a bill to establish a federal regulatory framework last month. Closer to home, Hong Kong set out a regulatory framework for stablecoins in June, with intentions for it to come into force by 2024.
