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Singapore to label regulated stablecoins in transparency push

Written by Nikkei Asia Published on   3 mins read

The issuers must meet criteria on value stability, minimum capital, and others.

Singapore plans to label so-called stablecoins, or cryptocurrencies pegged to legal tender, for issuers who meet regulatory criteria, as it works to bring greater transparency and stability to the fast-growing industry.

The Monetary Authority of Singapore (MAS), the country’s central bank and financial watchdog, laid out a new regulatory framework on Tuesday, following a feedback-gathering exercise that began in October last year.

The framework will apply to nonbank issuers of single-currency stablecoins pegged to the Singapore dollar or any other major G10 currency, including the US dollar and the Japanese yen, where their circulation exceeds SGD 5 million dollars (USD 3.68 million). The MAS will hold public consultations on legislative amendments next year.

“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,” the authority said in a statement. On-chain transactions refer to deals carried out on a blockchain and reflected on a public ledger.

Issuers must meet key requirements for value stability, capital, disclosure and others, to be certified as MAS-regulated stablecoins. Among the benchmarks, issuers must hold reserve assets of at least 100% value of the stablecoin in circulation at all times in liquid assets, including cash and cash equivalents.

The regulated issuers must ensure that customers can redeem the value of stablecoins at par within five business days. The framework sets a minimum base capital of SGD 1 million (USD 738,000) or half the issuer’s annual operating expenses.

The new rules highlight Singapore’s efforts to bring greater scrutiny to the crypto industry while spurring innovation in the Asian financial hub, which has seen both a wave of new entries and the collapse of unlicensed players in recent years.

Since last year, Singapore has been stepping up its control over the sector as more individuals gain access to the risky asset class. The MAS prohibited advertisements for crypto services in public spaces as the number of investors — estimated by crypto payment company Triple-A at over 640,000, or 11% of Singapore’s population — steadily increased.

The meltdown caused by the collapse of several unlicensed companies in Singapore cemented calls for greater oversight. Companies behind stablecoins TerraUSD and Luna, as well as crypto hedge fund Three Arrows Capital, wiped out billions in value after they imploded over a year ago.

Separately, Singapore earlier announced it will tighten rules on crypto companies, requiring them to keep customer assets in a trust and restricting their lending and “staking” of digital payment tokens. Staking allows investors to earn yields in return for depositing their crypto assets for use in blockchain transactions.

Still, even as the country tightens regulation of the crypto industry, the Asian financial hub has been more open to the use of stablecoins as a key technology that could catch on in the digital economy.

“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,” said Ho Hern Shin, the authority’s deputy managing director for financial supervision.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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