MAS Introduces Revised Regulatory Framework for Stablecoins

The Monetary Authority of Singapore (MAS) has unveiled a comprehensive regulatory framework designed to enhance stability within the realm of single-currency stablecoins (SCS) operating under the jurisdiction of the city-state. This strategic move, announced on August 15, seeks to foster an environment of confidence and security for non-bank issued stablecoins that are pegged to the Singapore dollar or other esteemed G10 currencies, including the euro, British pound, and United States dollar.

Under the purview of this new framework, stablecoins that fall within the prescribed criteria of having a circulation exceeding 5 million Singapore dollars (equivalent to approximately $3.7 million) will be subject to the regulatory oversight of MAS. The initiative aims to bolster the integrity and reliability of these digital assets, thereby contributing to the overarching stability of the local and global financial landscape.

Speaking on the significance of this regulatory development, Ho Hern Shin, the Deputy Managing Director of Financial Supervision at MAS, elucidated, “Our newly introduced framework has been strategically crafted to facilitate the seamless utilization of stablecoins as a reputable digital medium of exchange. Additionally, these stablecoins are poised to serve as a pivotal bridge between the fiat and digital asset ecosystems, thereby enriching the overall financial ecosystem.”

As part of the regulatory pathway, Ho Hern Shin extended an encouraging message to stablecoin issuers, urging them to take proactive steps towards achieving compliance. This proactive approach would ultimately lead to the prestigious label of being recognized as MAS-regulated, signifying adherence to the rigorous standards set forth by the monetary authority.

MAS Focused on Strengthening Oversight and Stability

The new framework lays out a series of stringent requirements that stablecoin issuers must adhere to, designed to bolster investor confidence and safeguard financial stability. According to MAS, these requirements encompass key aspects such as redemption timelines, reserve management, capital adequacy, and transparency.

Under the revamped guidelines, stablecoin issuers will be expected to meet a set of criteria that address different dimensions of stability and accountability:

  • Value Stability: MAS emphasizes the importance of maintaining value stability within the stablecoin ecosystem. Reserve assets held by stablecoin issuers will be subject to stringent requirements covering their composition, valuation, custody, and audit. These measures are designed to instill a high level of confidence in the stablecoin’s value stability.
  • Capital: In order to mitigate the risk of insolvency and ensure an orderly winding down of operations if needed, stablecoin issuers must maintain a minimum base capital and sufficient liquid assets. This requirement seeks to enhance the resilience of stablecoin issuers and minimize systemic risks.
  • Redemption at Par: The new framework mandates that stablecoin issuers must promptly return the par value of stablecoins to holders within a maximum period of five business days from the time a redemption request is made. This provision aims to enhance investor trust and liquidity.
  • Disclosure: To promote transparency and informed decision-making, stablecoin issuers are required to provide comprehensive disclosures to users. These disclosures must cover crucial information such as the mechanism used to stabilize the stablecoin’s value, the rights held by stablecoin holders, and the audit outcomes of reserve assets.

MAS has explicitly stated that only stablecoin issuers that fully adhere to the requirements set out in the new framework will be eligible to apply for MAS regulation. This regulatory status, according to the central bank, will serve as a clear distinction between regulated stablecoins and those that are not under MAS oversight.

The central bank has also issued a stern warning against misrepresentation. It cautions against falsely claiming a stablecoin to be MAS-certified, which would trigger penalties as outlined in the new framework. Such penalties include fines, imprisonment, and placement on an alert list.