In a groundbreaking move, Singapore has once again placed itself at the top of the crypto market. The city-state has announced the latest features of its stablecoin regulatory framework, marking the dawn of the ‘MAS-Regulated Stablecoins’ era. This move not only showcases Singapore’s booming crypto industry and innovation but marks a proper regulation for the stablecoin market amid worldwide regulatory hurdles.
Requirements To Become MAS-Regulated Stablecoins
Singapore’s central financial institution has unveiled an updated set of guidelines focused on ensuring the stability of single-currency stablecoins (SCS) governed within its jurisdiction.
On August 15, the Monetary Authority of Singapore introduced this framework, targeting non-banking stablecoins tied to the value of the Singapore dollar or major G10 currencies, including the euro, British pound, and US dollar. This applies especially to those with a circulation surpassing 5 million Singapore dollars (equivalent to $3.7 million).
Ho Hern Shin, the Deputy Managing Director of Financial Supervision at the bank, expressed that the primary goal of these guidelines is to promote the use of stablecoins as a trustworthy digital means of transaction, bridging the gap between fiat and stablecoins.
Shin emphasized that for stablecoin issuers aiming for their coins to receive the “MAS-regulated” designation, gearing up for compliance is essential. The framework set by MAS details various criteria for these issuers, such as:
- Value Stability: The reserve assets backing the stablecoin will have specific guidelines concerning their makeup, valuation, safekeeping, and auditing to ensure a consistent value.
- Capital: Issuers are mandated to hold a minimum foundational capital and liquid assets. This is to minimize insolvency risks and, if needed, facilitate a systematic business shutdown.
- Redemption at Face Value: Upon a redemption request, issuers are obligated to reimburse the stablecoin’s face value to its holders within a five-day window.
- Transparency: It’s imperative for issuers to offer clear information to their users. This includes insights into the stablecoin’s value stabilization methods, the rights of its holders, and audit findings of the reserve assets.
MAS highlighted that only those stablecoin issuers who meet the above requirements of the new framework can seek the “MAS-regulated” status. This distinction, as per the central bank, ensures users can easily differentiate between regulated and non-regulated stablecoins.
The updated regulatory guidelines incorporate insights from a public consultation held in October 2022. Before implementing the framework, MAS will conduct further consultations, and the parliament must approve the necessary amendments.
MAS’ Warning To Stablecoin Issuers
According to the statement, individuals who falsely label a token as a “MAS-regulated stablecoin” could face sanctions as per MAS’ stablecoin guidelines and might be added to the MAS’ Investor Alert List. Users are advised to assess the potential risks and make well-informed choices when dealing with stablecoins that don’t fall under the MAS’ regulatory purview.
Stablecoins, digital currencies pegged to stable assets like fiat currencies, have been gaining traction worldwide due to their potential to reduce volatility in the crypto market. Recognizing this potential, the Monetary Authority of Singapore (MAS) has taken these steps to ensure that these digital assets are regulated, secure, and beneficial for both investors and the economy.
Over the past year, Singapore has intensified its oversight of the crypto sector as a growing number of individuals venture into this volatile asset class. The MAS imposed a ban on crypto service advertisements in public areas, responding to the surge in investors. According to crypto payment firm Triple-A, this number has reached over 640,000, which is about 11% of Singapore’s populace.
The urgency for enhanced regulation became evident following the downfall of several unlicensed entities in Singapore. Notably, companies behind stablecoins like TerraUSD and Luna, along with the crypto hedge fund Three Arrows Capital, saw billions in value evaporate after their dramatic collapse just over a year ago.
In a related move, Singapore has declared its intention to enforce stricter regulations on crypto businesses. These measures include mandating these companies to hold customer assets in a trust and limiting their ability to lend and “stake” digital payment tokens. For the uninitiated, staking offers investors the opportunity to earn returns by allocating their crypto assets for blockchain transaction purposes.
