INSITE - SINGAPORE - 21 August 2023
- Jodha Legal
- Aug 21, 2023
- 2 min read
MAS FINALISES STABLECOIN REGULATORY FRAMEWORK
Summary: The Monetary Authority of Singapore (MAS) recently revealed its official guidelines for stablecoin issuers licensed in Singapore. This move is seen as a way to provide clear regulations for the expanding stablecoin sector.
Stablecoins are special cryptocurrencies that are linked to the value of another currency, commodity, or financial item. They offer a less volatile option for transactions compared to other cryptocurrencies.
In detail: The MAS created its framework based on input gathered after a public discussion on 26 October 2022. The Payment Services Act 2019 will be updated to include "Stablecoin Issuance Service" as a new regulated payment service. Stablecoins that follow the rules will be called "MAS-regulated stablecoins," and only those following these rules can use this label. The MAS thinks stablecoins, which are digital tokens designed to have a steady value compared to certain regular currencies, can be useful for reliable transactions if they are regulated correctly. This stability could be useful for new ideas like trading digital assets directly on the blockchain. MAS’ stablecoin regulatory framework will apply to Single-Currency Stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency.
Issuers of SCS will have to fulfil key requirements relating to:
Value Stability: For stablecoins tied to one currency, their reserve assets must meet specific requirements regarding how they're made up, valued, stored, and audited. This ensures a strong level of confidence in maintaining a stable value.
Capital: Those issuing stablecoins need to keep a certain amount of capital and easily accessible funds. This minimizes the risk of going bankrupt and allows for an organized winding down of operations if needed.
Redemption: Stablecoin issuers have to give back the same value that the stablecoin represents within five business days when someone asks to redeem it.
Disclosure: Issuers must provide clear information to users, including details about how the stablecoin's value is maintained, the rights of stablecoin holders, and the outcomes of audits on the assets backing the stablecoin.
MAS Regulated Stablecoins
Only stablecoin issuers who meet all the requirements in the system can ask MAS to officially recognise their stablecoins as "MAS-regulated stablecoins." This special label helps users easily tell the difference between stablecoins regulated by MAS and other digital tokens, including "stablecoins" not governed by MAS rules. If someone wrongly calls a token a "MAS-regulated stablecoin", they might face penalties under MAS rules and be listed on MAS' Investor Alert List. Users should carefully decide about risks if they use stablecoins not regulated by MAS.
Conclusion: The new stablecoin rules make Singapore's digital asset regulations even stronger and show the country's dedication to creating a safe and clear digital asset ecosystem. With a specific framework for stablecoins, Singapore is making progress toward creating a complete and organized regulatory system for all types of digital assets. This brings more clarity and responsibility for everyone involved in this space.
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