The Singapore government has posted a response to questions emanating from Parliament pertaining to the collapse of TerraUSD – LUNA. TerraUSD was an aspiring algorithmic stablecoin that was tied to LUNA. TerraUSD sought to maintain a US dollar peg but failed in its mission, thus resulting in a run on the bank event that drove Terra to near zero. The collapse of TerraUSD was even more spectacular due to the hubris exhibited by its creators.
Saktiandi Supaat, MP, inquired as to the exposure of Singaporeans to the failed crypto and if there were concerns of systemic risk, as well as inquiring about the status of the “overarching regulatory approach” by the Monetary Autho0rity of Singapore (MAS).
Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS, responded to the questions.
Shanmugaratnam told Parliament that spillover risk to the financial system is limited and banks have very limited exposure to the crypto ecosystem.
“Alongside other regulators globally, MAS is actively reviewing its approach to the regulation of stablecoins. Currently, stablecoins, together with other cryptocurrencies such as Bitcoin, are considered digital payment tokens (DPTs) under the Payment Services Act. The regulatory regime for DPT services under the Act primarily targets money laundering/terrorism financing and technology risks. Hence, services relating to DPTs that pose such risks, including dealing and facilitation of exchange, are subject to regulation. MAS is assessing the merits of a regulatory regime tailored to the specific characteristics and risks of stablecoins, such as regulating the reserve requirements and the stability of the peg, and will consult the public in the coming months.”
Acknowledging that the collapse of the TerraUSD and Luna “illustrates the high risks” of crypto – an issue that MAS has warned the public about repeatedly. The Minister did not comment on any specific investigation or review in regards to TerraUSD/LUNA