The Monetary Authority of Singapore (MAS) released a regulatory framework Tuesday (August 15) intended to stabilize single-currency stablecoins, which would apply to non-bank issuers of stablecoins pegged to the Singaporean dollar or any G10 currencies where their circulation exceeds SG$5 million ($3.69 million).
All coins by issuers approved by Singapore's central bank would be labeled as MAS-regulated stablecoins. However, the MAS has to hold legislative consultations before its parliament could pass amendments bringing the framework into force, Reuters reported.
Meanwhile, the US is also seeking to regulate stablecoins in its jurisdiction, with the US House Financial Services committee advancing a bill to establish a federal regulatory framework last month.
MAS: Stablecoin Issuers Required to Provide Information to Regulator
In the procedure, issuers of MAS-regulated stablecoins must fulfill requirements related to value stability, capital, and redemption at par where issuers must return the par value of single-currency stablecoin to holders within five business days from a redemption request, and disclosure to users on audit results.
Issuers also have to maintain a portfolio of reserve assets "with very low risk," which must be at least 100% of the outstanding single-currency stablecoins that are in circulation. The assets should also maintain a minimum base capital higher than SG$1 million or half of annual operating expenses.
"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 MAS said in a statement.
MAS's Decision Commended by Top Stablecoin Players
The stablecoin market is valued at $125 billion, with two tokens - Tether's USDT
and Circle's USDC - dominating roughly 90% of the market cap value.
However, stablecoins are broadly unregulated globally, as per CNBC.
Stablecoins have typically been the backbone of cryptocurrency trading as they allowed traders to move in and out of different digital coins without converting back to fiat currency, and the tokens could be used for multiple purposes, including remittances.
However, there have been criticisms of stablecoin issuers about the transparency of the reserves they hold, partially caused by the collapse of a so-called algorithmic stablecoin named UST.
With the new rules, Singapore aims to bring more clarity to the industry.
Circle's Asia-Pacific vice president of strategy and policy Yam Ki Chan told CNBC the firm commended the MAS's new rules, saying it was among a set of forward-looking regulators globally in establishing a clear and transparent regulatory framework for stablecoins and digital assets.
"We commend the [MAS] for introducing a robust stablecoin framework that balances innovation and customer protection," he added.
