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Singapore’s Monetary Authority Strengthens Stability of Single-Currency Stablecoins with New Regulatory Framework

Single-Currency Stablecoin

In a move aimed at enhancing the stability of single-currency stablecoins, Singapore’s central bank unveiled a comprehensive regulatory framework on Tuesday. The framework is set to apply to non-bank entities that issue single-currency stablecoins linked to the Singapore Dollar or any G10 currencies, provided their circulation surpasses S$5 million, according to the Monetary Authority of Singapore (MAS).

Under this framework, these stablecoins will be designated as MAS-regulated stablecoins. However, before the framework can be implemented, the central bank will engage in legislative consultations, seeking necessary amendments to be passed by Parliament.

What is a Single-Currency Stablecoin?

Single-currency stablecoins, a form of cryptocurrency backed by conventional assets such as national currencies, come under the spotlight with this regulatory initiative. Presently, Singapore has witnessed the issuance of only one stablecoin.

MAS highlighted the potential benefits of well-regulated stablecoins in facilitating secure exchanges and supporting innovative transactions involving digital assets. The central bank’s statement emphasized that properly regulated stablecoins could serve as a reliable medium of exchange, promoting advancements like on-chain transactions of digital assets.

Citing instances of notable failures like the collapse of TerraUSD (UST) and Luna tokens, MAS referred to the substantial risks linked to investments in cryptocurrencies. This underscores the importance of regulatory measures to safeguard investors and ensure the integrity of the financial ecosystem.

This development echoes global efforts in this domain, as the United States has also embarked on regulatory endeavors. The U.S. House Financial Services committee recently made strides in advancing legislation to establish a federal regulatory framework for stablecoins.

Robust Regulations Mandated for MAS-Regulated Stablecoin Issuers

MAS-regulated stablecoin issuers will be subjected to stringent criteria covering value stability, capital reserves, and redemption procedures. As per the new regulations, issuers are required to promptly redeem stablecoins at par value within five business days upon a redemption request. Additionally, users must be provided with transparent information about audit results.

Among the stipulations, stablecoin issuers must maintain a portfolio of reserve assets characterized by minimal risk. The value of these reserve assets should be equivalent to or exceed 100% of the outstanding single-currency stablecoins in circulation.

Furthermore, issuers are mandated to maintain a minimum base capital that exceeds S$1 million or half of their annual operating expenses. These measures collectively aim to enhance the security and reliability of stablecoins in Singapore’s financial landscape.

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