Nature of Stablecoins

What are the proposed changes to stablecoin regulations by MAS?

MAS' view on current stablecoin regulations.

According to MAS (Consultation Paper)
last revised 26 October 2022

Stablecoins are treated as DPTs under the PS Act today. Correspondingly, entities that provide the service of dealing in and/or facilitating the exchange of stablecoins would fall within the scope of regulated DPT services. DPT service providers are regulated primarily for money laundering (ML) and terrorism financing (TF), and technology risks. They are also required to provide risk warning disclosures to customers. 

As Singapore looks to develop a digital asset ecosystem, there is a need to put in place a regulatory regime that supports the development of credible and reliable stablecoins that facilitate digital transactions. The current regulatory treatment under the PS Act is not adequate to achieve this objective as it does not regulate to ensure that stablecoins maintain a high degree of value stability and any associated stabilisation mechanisms. 

Proposed changes to regulations:

Screenshot 2022 10 31 at 3.28.25 Pm

According to MAS (Media Releases)
last revised 26 October 2022

MAS will regulate the issuance of stablecoins which are pegged to a single currency (“SCS”) where the value of SCS in circulation exceeds S$5 million. The key proposed issuer requirements relate to –

  • Value Stability.  SCS issuers must hold reserve assets in cash, cash equivalents or short-dated sovereign debt securities [1] that are at least equivalent to 100% of the par value of the outstanding SCS in circulation, and these assets must be denominated in the same currency as the pegged currency. Requirements on audit and segregation of reserves, and timely redemption at par value will also apply. 
  • Reference Currency. All SCS issued in Singapore can be pegged only to the Singapore dollar or any Group of Ten (G10) currencies. [2]  
  • Disclosures.  Stablecoin issuers will be required to publish a white paper disclosing details of the SCS, including the redemption rights of stablecoin holders.
  • Prudential Standards.  SCS issuers must, at all times, meet a base capital requirement of the higher of S$1 million or 50% of annual operating expenses of the SCS issuer.  They are also required to hold liquid assets which are valued at higher of 50% of annual operating expenses or an amount assessed by the SCS issuer to be needed to achieve recovery or an orderly wind-down.  
  • Banks in Singapore will be allowed to issue SCS as well, and no additional reserve backing and prudential requirements will apply when the SCS is issued as a tokenised form of bank liabilities given the existing rigorous capital and liquidity frameworks applied to banks. For non-issuance services, DPT service providers can offer all types of stablecoins provided that they clearly label the MAS-regulated SCS to distinguish them from the unregulated ones. This will help customers make informed decisions on the risks involved in using unregulated stablecoins.
FinReg business tip

MAS also plans to expand the current regulated activities under the Payment Services Act, 2019 to include "Stablecoin Issuance Service". Entities that fall under this activity will have to comply with the prescribed licensing requirements.