Singapore’s central bank, the Monetary Authority of Singapore (MAS), has recently unveiled a revised regulatory framework that aims to ensure stability for single-currency stablecoins (SCS) regulated within the city-state. This regulatory framework, announced on August 15th, primarily focuses on non-bank issued stablecoins that are pegged to the value of the Singapore dollar or other G10 currencies like the euro, British pound, and United States dollar. However, it applies specifically to stablecoins with a circulation exceeding 5 million Singapore dollars ($3.7 million).
Through this new framework, MAS 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. The framework encourages stablecoin issuers to proactively prepare for compliance if they wish to have their stablecoin recognized as MAS-regulated.
Key Requirements for Stablecoin Issuers
The revised regulatory framework establishes several requirements that stablecoin issuers must adhere to in order to obtain MAS regulation. These requirements span various aspects of stablecoin operations, including value stability, capital management, redemption timelines, and disclosure:
In terms of value stability, reserve assets held by stablecoin issuers must meet specific requirements regarding their composition, valuation, custody, and audit. These measures are in place to provide a high level of assurance regarding the stability of the stablecoin’s value.
To mitigate the risk of insolvency and ensure an orderly wind-down of business if necessary, stablecoin issuers must maintain a minimum base capital and sufficient liquid assets.
Redemption at Par
Issuers are obligated to return the par value of stablecoins to holders within five business days from a redemption request, ensuring liquidity and preserving trust in the stability of the stablecoin.
Stablecoin issuers must provide comprehensive disclosures to users, including information on the mechanism that stabilizes the value of the stablecoin, the rights of stablecoin holders, and the audit results of reserve assets.
MAS highlights that only stablecoin issuers who comply with the requirements outlined in the revised framework can apply to become MAS-regulated. This regulatory label serves as a clear distinction between regulated stablecoins and non-regulated stablecoins for users in the market.
The central bank warns that misrepresenting a stablecoin as MAS-certified will result in penalties as stipulated in the new framework. These penalties include fines, imprisonment, and inclusion in an alert list. It is evident that MAS is taking a proactive approach to regulate stablecoin issuers and protect consumers in the fast-evolving digital asset landscape.
The revised regulatory framework takes into account feedback gathered from a public consultation held in October 2022. However, before the framework can be enforced, MAS will conduct further consultations, and amendments will need to be made by parliament.
As the digital asset industry continues to grow, the regulations governing stablecoins play a crucial role in ensuring stability, safeguarding users, and maintaining financial integrity. MAS’s efforts to establish a comprehensive regulatory framework for stablecoins demonstrate its commitment to promoting responsible innovation while mitigating potential risks.
The revised regulatory framework released by MAS represents a significant step towards fostering stability in the single-currency stablecoin market. By setting clear requirements for stablecoin issuers and differentiating regulated stablecoins, MAS aims to enhance user confidence and protect the integrity of its financial system. As the framework undergoes further consultations and amendments, it will be fascinating to observe how stablecoin issuers adapt and comply with the evolving regulatory landscape.