The Monetary Authority of Singapore (MAS) disclosed a comprehensive regulatory framework designed to ensure strong value stability for regulated stablecoins in the country. The framework is the result of a detailed review process following a public consultation held in October 2022.
Stablecoins are digital tokens crafted to maintain a consistent value against specific fiat currencies. With effective regulation to preserve this stability, stablecoins can play a pivotal role as dependable mediums of exchange, facilitating innovation such as on-chain trading of digital assets.
MAS’ regulatory framework for stablecoins will primarily focus on single-currency stablecoins (SCS) tied to either the Singapore Dollar or a G10 currency. Such SCS issuers must attach to essential requirements containing:
- Value Stability: SCS reserve assets will be subject to rigorous standards involving composition, valuation, safekeeping, and regular audits. These measures are aimed at instilling a high level of confidence in the stability of their value.
- Capital Adequacy: Issuers are mandated to maintain a minimum baseline capital and readily accessible liquid assets. This step is taken to mitigate insolvency risks and facilitate an orderly business transition if necessary.
- Prompt Redemption: Issuers are obligated to promptly return the par value of SCS to holders within five business days of a redemption request.
- Transparency: Issuers must provide comprehensive disclosures to users. This includes details about the mechanism for stabilizing the SCS value, the rights granted to SCS holders, as well as the outcomes of reserve asset audits.
Only stablecoin issuers meeting MAS requirements can be recognized as “MAS-regulated stablecoins.” This distinguishes them from unregulated tokens. Falsely labeling may lead to penalties and listing on MAS Investor Alert List. Users should assess the risks of non-MAS-regulated stablecoins.
Ms. Ho Hern Shin, Deputy Managing Director (Financial Supervision) at MAS, expressed, “Our stablecoin regulatory framework is designed to promote the adoption of stablecoins as a credible digital medium of exchange and as a vital bridge between traditional fiat and the digital asset ecosystem. We urge potential SCS issuers seeking the designation of ‘MAS-regulated stablecoins’ to initiate preparatory efforts for compliance without delay.”
In a recent report by Toadyq News on August 2, 2023, Singapore’s central bank, led by Minister Tharman Shanmugaratnam, was actively reviewing its regulatory approach to stablecoins. They were considering tailored regulations to address the unique risks posed by stablecoins and might adjust reserve requirements for issuers.