Following feedback from its October 2022 public consultation, the Monetary Authority of Singapore (MAS) has announced the features of a new regulatory framework. It will target stablecoin value in Singapore.
MAS’ stablecoin regulatory framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency, that are issued in Singapore. Stablecoins are digital payment tokens. They are designed to maintain a constant value against one or more specified fiat currencies. When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium of exchange to support innovation. This includes the ‘on-chain’ purchase and sale of digital assets.
Issuers of such SCS will have to fulfil key requirements relating to:
- Value stability. SCS reserve assets will be subject to requirements relating to their composition, valuation, custody and audit, to give a high degree of assurance of value stability.
- Capital. Issuers must maintain minimum base capital and liquid assets to reduce the risk of insolvency and enable an orderly wind-down of business if necessary.
- Redemption at Par. Issuers must return the par value of SCS to holders within five business days from a redemption request.
- Disclosure. Issuers 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.
Receiving ‘MAS-regulated stablecoin’ recognition
Only stablecoin issuers that fulfil all requirements under the framework can apply to MAS. If successful, their stablecoins are to be recognised and labelled as ‘MAS-regulated stablecoins’.
This label will enable users to readily distinguish MAS-regulated stablecoins from other digital payment tokens. This includes stablecoins which are not subject to MAS’ stablecoin regulatory framework.
Any person that misrepresents a token as an ‘MAS-regulated stablecoin’, may be subject to penalties under MAS’ stablecoin regulatory framework. They will also be placed on MAS’ Investor Alert List. Therefore, users should make their own informed decisions on the accompanying risks.
Ms Ho Hern Shin, deputy managing director (Financial Supervision), MAS, said: “MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange. Not only that but also as a bridge between the fiat and digital asset ecosystems. Lastly, we encourage SCS issuers who would like their stablecoins recognised to make early preparations for compliance.”
Commenting on MAS’ framework, Penny Chai, VP of business development, APAC at Sumsub, the compliance solution provider, said:
“Singapore’s aim to establish comprehensive regulations for stablecoins is a significant step towards fostering a secure and transparent digital currency environment. The move sets a noteworthy example for other jurisdictions. Stablecoins have surpassed $100billion in market value, according to recent reports. Therefore, the need for regulatory clarity is paramount as the market continues to grow.
“Singapore is evidently positioning itself as a hub for digital currencies, with a clear intention to attract foreign firms. Importantly, the recognition of stablecoins as virtual assets (VAs) or traditional assets by the Financial Action Task Force (FATF) underscores their growing influence within the financial sector. As a result, those offering services related to stablecoins are required to adhere to anti-money laundering (AML) regulations to ensure transparency and uphold accountability standards.
“Failing to adhere to this regulation could potentially result in fraudulent activities due to the inability to identify suspicious users, leading to financial penalties and substantial reputational harm for cryptocurrency businesses operating in Singapore and broader markets, APAC and further beyond. Companies must prioritise establishing crypto transaction monitoring tools and comprehensive AML compliance and verification procedures, both during the onboarding process and beyond.”