On 15 August 2023, the Monetary Authority of Singapore (MAS) released details of Singapore's proposed new regulatory framework for stablecoins. The regulatory framework takes into account feedback received in a October 2022 public consultation.
MAS's framework narrowly defines stablecoins as:
digital payment tokens designed to maintain a constant value against one or more specified fiat currencies.
According to the MAS, well-regulated stablecoins that preserve value stability:
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 are issued in Singapore. Issuers of such SCS will have to fulfil key requirements relating to:
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 (i.e. reserve assets must be at least 100% of the outstanding SCS in circulation).
Capital: Issuers must maintain minimum base capital (i.e. higher than S$1 million or half of annual operating expenses) 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.
Only stablecoin issuers that fulfil all requirements under the framework can apply to MAS for their stablecoins to be recognised and labelled as “MAS-regulated stablecoins”. Non-SCS stablecoins will continue to be subject to the Payment Services Act 2019 which applies to Digital Payment Tokens.
MAS says this label will enable users to readily distinguish MAS-regulated stablecoins from other digital payment tokens (including “stablecoins” which falls outside of MAS’ stablecoin regulatory framework). Any person that misrepresents a token as an “MAS-regulated stablecoin”, may be subject to penalties (e.g. financial penalties or imprisonment) under MAS’ stablecoin regulatory framework, and placed on MAS’ Investor Alert List.
Ho Hern Shin, Deputy Managing Director (Financial Supervision) of MAS, said,
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.
Ho further added:
We also encourage SCS issuers who would like their stablecoins recognised as “MAS regulated stablecoins” to make early preparations for compliance.
MAS's full response to the consultation can be found here. The MAS also published this helpful infographic setting out the key aspects of its proposed regime:
The MAS paper represents MAS’ finalised regulatory approach towards stablecoins in Singapore, as well as its response to the public consultation. The MAS will hold legislative consultations before Parliament passes legislation to bring the framework into force.
The MAS's proposed straightforward framework establishes a model for other jurisdictions to follow and which is likely to be easily understood by consumers. In some respects, it is narrower and simpler than the EU's MiCA framework for e-money and asset-referenced tokens, while still incorporating some of its key elements and protections.
A number of stablecoin developments have made headlines in recent weeks. Last month, the US House of Representatives passed a stablecoin bill, raising hopes that the United States may establish a federal regime for stablecoins in the near future. Despite the absence of a current US framework, payments giant, PayPal, launched its own USD stablecoin earlier this month deepening its push into digital assets.