In a move to enhance the robustness of single-currency stablecoins, Singapore's central bank unveiled a comprehensive regulatory framework on Tuesday. The initiative aims to fortify the stability of these digital assets linked to a sole currency. Under this regulatory structure, the Monetary Authority of Singapore (MAS) stipulated that the regulations would be applicable to non-bank entities that issue single-currency stablecoins tied to either the Singapore Dollar or any of the G10 currencies. The regulatory scope would encompass instances where the circulation of these stablecoins surpasses S$5 million.
The coins that satisfy these criteria would be designated as MAS-regulated stablecoins. However, prior to the framework's implementation, the central bank must engage in legislative discussions and secure the passage of amendments through Parliament.
Single-currency stablecoins represent a category of cryptocurrencies that are tethered to conventional assets such as national currencies. Currently, Singapore has witnessed the issuance of only one stablecoin.
The MAS issued a statement asserting, "When subjected to effective regulation that ensures their value stability, stablecoins can play a crucial role as dependable mediums of exchange, fostering innovation, including the seamless 'on-chain' trading of digital assets."
Pointing to past incidents of notable failures like the collapse of TerraUSD (UST) and Luna tokens, the MAS underscored the considerable risks associated with cryptocurrency investments. These incidents from the previous year underscored the need for a regulatory framework.
The United States is concurrently moving towards regulating these forms of digital assets, with the US House Financial Services Committee recently advancing a bill aimed at establishing a federal regulatory framework.
Entities subject to MAS regulations regarding stablecoins will be required to fulfil various conditions. These include upholding value stability, maintaining an ample capital base, facilitating redemption at par—ensuring the prompt return of the stablecoin's par value to holders within five business days of redemption requests—and providing users with transparent information about audit outcomes.
Notable among these provisions is the requirement for issuers to uphold a reserve asset portfolio characterised by "very low risk." The total value of these reserves must be at least equivalent to 100 per cent of the aggregate value of single-currency stablecoins in circulation.
Additionally, issuers will be mandated to sustain a minimum base capital that exceeds S$1 million or is equal to at least half of their annual operational expenses. These requirements are envisioned to promote the stability and reliability of single-currency stablecoins within Singapore's financial landscape.
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