Singapore Releases Revised Regulatory Framework For Stablecoins

Table of Contents

• Better Regulatory Clarity 
• Details Of The Framework 
• Attempts At Regulating Stablecoins

Singapore’s central bank has announced the release of a revised regulatory framework to ensure stability for single-currency stablecoins regulated in the city-state. 

The framework outlines requirements that issuers need to meet to be deemed as regulated by the monetary authority of Singapore. 

Better Regulatory Clarity 

The revised framework was announced on the 15th of August and is primarily aimed at non-bank issued stablecoins that are pegged to the value of the Singapore Dollar, or G10 currencies, including the British Pound, Euro, and the United States Dollar, and whose circulation is greater than 5 million Singapore Dollars. The Monetary Authority of Singapore stated, 

“Stablecoins are digital payment tokens 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, including the “on-chain” purchase and sale of digital assets. MAS’ stablecoin regulatory framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency that is issued in Singapore.”

According to the Singapore central bank’s financial supervision deputy managing director, Ho Hern Shin, the framework helps to establish and facilitate stablecoin use as a credible digital medium of exchange and a bridge between the traditional and digital currency ecosystems. Shin also urged stablecoin issuers to prepare for compliance if they wished for their stablecoin to be labeled as regulated by the Monetary Authority of Singapore. 

Details Of The Framework 

The revised regulatory framework lists several requirements for stablecoin issuers. These include redemption timelines, reserve management, disclosures, and capital requirements. According to the MAS, reserve assets will be subject to requirements depending on their valuation, composition, custody, and audit. Stablecoin issuers will also have to maintain a minimum base capital and liquid assets to stave off any risk of insolvency. Stablecoin issuers will also be required to return the par value of the stablecoins to holders within five business days following a redemption request. 

The Monetary Authority of Singapore also observed that only those issuers who could fulfill the revised requirements could apply to be regulated by the MAS. According to the country’s central bank, this label would help distinguish regulated stablecoins from non-regulated ones in the market. It also warned that those representing a token or stablecoin to be certified by the Monetary Authority of Singapore would also be subject to penalties defined in the new framework. The penalties include prison time, fines, as well as the addition on an alert list. 

Penny Chai, VP of Business Development for Sumsub in APAC, reiterates the importance of crypto businesses prioritizing AML compliance processes:

"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 $100 billion in market value, according to recent reports, therefore the need for regulatory clarity is paramount as the market continues to grow.
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."

Attempts At Regulating Stablecoins

The revised framework takes into account feedback from a public consultation held in October 2022. However, the MAS will still need to hold consultations, while parliament would need to pass amendments to enforce the revised framework. The MAS highlighted the risks involved in investing in crypto last year following the collapse of the TerraUSD (UST) and Luna tokens. The United States is also looking to pass regulations regarding stablecoins. The United States House Financial Services Committee had recently proposed a bill that would establish a federal regulatory framework. 

The bill proposes that the United States Federal Reserve draw up requirements for the issuance of stablecoins while maintaining the authority of state regulators. The bill was modified after several democrats raised concerns that stablecoin issuers could simply bypass stricter federal oversight by opting to be regulated by state regulatory authorities.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.