On Wednesday, the Monetary Authority of Singapore (MAS) proposed new rules for the crypto industry, including strict guidelines for stablecoin issuers.
The proposal comes after a series of happenings in the crypto sector, especially after the collapse of several multi-billion dollar enterprises that had ties with the country. The MAS had promised to be firm in the regulation of the sector and has revealed its concern over the retail customers who might not be able to pull through massive losses hailing from trading based on speculations.
MAS’s proposal contains several rules to regulate the sector, including setting capital and reserving requirements for issuers of stablecoins. Further, it intends to ban issuers from engaging in activities that introduce additional risks like lending or staking, letting users lock their crypto and earn interest. The proposal is open to public opinion until December 21.
According to the proposal, MAS wants stablecoin issuers to keep their reserves in tandem with the value of crypto in circulation. Hence, a stablecoin issuer will be required to hold cash reserves equivalent to the worth of coins in circulation, but the reserves must be in the same currency in which the stablecoin is fixed. It also seeks to establish a base capital requirement likely higher than 1 million Singapore dollars (around $709,000) or operating expenses projected for six months.
To prevent the chances of overleveraging leading to the collapse of enterprises, it also intends to restrict the stablecoin issuers from providing other non-issuance services like lending, staking, and trading. However, the companies can engage in the activities via a separate relative entity in which the issuer does not hold stakes.
Further, the MAS proposal suggests that the crypto service providers should test the financial knowledge of their retail customers. Still, the requirement does not apply to AI-based trading systems or professional investors. It also urged the crypto platforms to establish and implement effective policies and procedures to observe and address conflicts of interest with their clients, along with measures to prevent them.