In a move aimed at fortifying the stability of single-currency stablecoins, Singapore’s central bank has introduced a comprehensive regulatory framework.
According to the Monetary Authority of Singapore (MAS), the framework will be applicable to non-bank entities that issue single-currency stablecoins tied to either the Singapore Dollar or any of the G10 currencies. This will come into play when the circulation of these stablecoins surpasses S$5 million.
Under the new regulations, these stablecoins will be designated as MAS-regulated stablecoins. The implementation of the framework requires the central bank to conduct legislative consultations and have amendments passed by the Parliament.
Single-currency stablecoins represent a class of cryptocurrencies pegged to conventional assets like national currencies. Presently, Singapore has seen the issuance of just one stablecoin.
MAS emphasised that well-regulated stablecoins, which maintain consistent value, can function as reliable mediums of exchange, supporting innovative practices like the on-chain trading of digital assets.
Highlighting instances of “high profile failures” such as the collapse of TerraUSD (UST) and Luna tokens, MAS stated that these incidents underscore the significant risks associated with cryptocurrency investments.
The United States is also actively pursuing regulations for such stablecoins. Recently, the U.S. House Financial Services Committee moved forward with a bill to establish a federal regulatory framework for stablecoins.
Issuers of stablecoins regulated by MAS are obligated to adhere to several requirements. These include ensuring value stability, maintaining a reserve portfolio of assets with minimal risk, and promptly redeeming stablecoins at par when holders request redemption. Additionally, issuers are required to disclose audit results to their users.
The regulatory measures dictate that issuers must maintain a reserve portfolio of assets deemed to have extremely low risk. This portfolio should account for at least 100% of the total outstanding single-currency stablecoins in circulation.
Furthermore, issuers are mandated to maintain a minimum base capital that exceeds S$1 million or is higher than half of their annual operating expenses.