The Monetary Authority of Singapore (MAS) has revealed the regulatory framework for compliant stablecoins. Singapore is the top Fintech hub in Asia. MAS is a key collaborator in enabling Fintech innovation.
In 2022, MAS kicked off a public consultation on stablecoins, asset-backed digital assets typically tied to a currency like the dollar. MAS states that well-regulated stablecoins can serve as a “trusted medium of exchange.” This is inclusive of “on-chain” purchases of digital assets.
The new framework will apply only to currency-based digital assets such as the Singapore Dollar or any other G-10 fiat currency. Some issuers have tied stablecoins to other assets – like gold, and some have attempted to offer algorithmic stablecoins with limited success. MAS states that “digital payment tokens,” or DPTs have the potential to become a widely utilized method of payment. The regulator adds that the past few years have “sharpened the clarity of thinking” on stablecoins.
For issuers to be compliant with the new rules, they must provide the following:
- 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.
Isuers must apply to MAS to receive approval to offer stablecoins. Approved issuers will be able to promote they are MAS Regulated Stablecoins.
Ho Hern Shin, Deputy Managing Director of Financial Supervision at MAS, commented on the new rules:
“MAS’ stablecoin regulatory framework 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. We encourage SCS issuers who would like their stablecoins recognised as “MAS regulated stablecoins” to make early preparations for compliance.”
While MAS has pushed forward with the new form of payments and transfers, the US has struggled to garner sufficient political support for what may become the preferred method of payments in the future. Some perceive stablecoins as the next generation of payment rails similar to Visa or Mastercard.
At the same time, some insiders believe that for the US dollar to maintain its reserve currency status – or enhance it – they must allow for regulated stablecoins.
Issuers in Singapore must hold reserves in low-risk, highly liquid assets valued at 100% or more of aggregate stablecoin value at all times.
The statement by MAS represents the finalized regulatory approach to DPTs or stablecoins.
The response to the consultation on stablecoins is available here.