Nature of Stablecoins

 

In October 2022, MAS proposed new measures to regulate stablecoin issuers.

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

Stablecoins have the potential to be a medium of exchange to facilitate transactions in the digital asset ecosystem, provided they are well-regulated and securely backed. The current regulatory framework, which primarily addresses money laundering and terrorism financing risks, and technology and cyber risks, will be expanded to ensure that regulated stablecoins have a high degree of value stability.

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
• Reference Currency
• Disclosures
• Prudential Standards

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In its consultation paper, MAS stated its regulatory position as follows.

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

3.1 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.

3.2 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.

3.3 MAS’ regulatory approach to stablecoins is framed by three key guiding objectives:

1. Support the development of value-adding payment use cases for stablecoins, and anchor strong stablecoin issuers as utility service providers for the digital asset ecosystem.
2. Adopt a progressive regulatory approach that is fit for purpose and provides for stepping up of measures as needed.
3. Maintain an open regime to accommodate different forms of stablecoins, including bank-issued ones.

3.4 As the current regulatory regime for DPTs remains relevant for non-stablecoin DPTs, MAS intends to set out a specific regulatory regime to address the regulation of stablecoin issuers and intermediaries.