Digital assets, payments firms toy with stablecoin plans after release of new Singapore framework

SINGAPORE - Some digital assets and payments companies in Singapore are now considering plans to issue stablecoins from the Republic or registering their tokens with the regulator.

This comes after the Monetary Authority of Singapore (MAS) on Tuesday

announced its finalised rules for Singapore-licensed stablecoin issuers,

a move that players and observers said would bring clarity to the growing industry.

Stablecoins are cryptocurrencies that have their values pegged, or tied, to that of another currency, commodity, or financial instrument. They are used as an alternative medium of exchange to more volatile cryptocurrencies like Bitcoin.

Payments firms StraitsX and Circle Internet Singapore (Circle Singapore) as well as DCS Card Centre said they are looking at the possibilities now that the stablecoin framework is finalised.

StraitsX and Circle Singapore are both licensed to carry out digital payment token (DPT) services here, while DCS, formerly known as Diners Club Singapore, is governed by Singapore’s Banking Act.

Mr Liu Tianwei, co-founder of StraitsX, said the firm is looking at getting the MAS-regulated label for its XSGD Singdollar stablecoin.

He said the team has been working with the regulator to ensure early compliance with the new stablecoin rules. “What it means is that there will be a licence variation or upgrade process where XSGD will be deemed an MAS-regulated stablecoin on top of the existing DPT regulations that it is already subjected to.”

StraitsX issues the XSGD and XIDR that are pegged respectively to the Singdollar and Indonesian rupiah on a one-to-one basis.

Asked if it would issue stablecoins pegged to other currencies, StraitsX said it believes it is in a good position to pursue new expansion opportunities, given its relatively long operating history as one of the leading issuers of non-US dollar stablecoins.

Mr Chan Yam Ki, vice-president of strategy and policy for Circle, which issues the USDC, the world’s second-largest stablecoin, said the firm is “assessing possibilities within the scope of our current licensed capacities” now that there is this new framework.

DCS, which recently issued DUS, is reviewing the new regulations before registering its payment token as an MAS-regulated single-currency stablecoin (SCS) in the coming months. DUS is issued only in Singapore.

The firm’s chief executive, Ms Karen Low, told The Straits Times that DUS is pegged to the US dollar on a one-to-one ratio and the token is issued in accordance with the MAS framework.

“We will leverage DUS to create a payment ecosystem between Web2 and Web3, using blockchain, privacy-preserving computation, and other technologies to drive innovative development in the blockchain payment field,” said Ms Low.

She added that DCS is now in discussions to be listed on crypto exchanges used in Singapore to widen access to its payment token.

Meanwhile, DBS’ head of digital assets, Ms Evy Theunis, said the bank, which has a digital asset exchange, is ready to partner stablecoin issuers who meet the new regulatory requirements.

“After MAS issued its consultation paper last October, we have looked at the required solutions, and, more importantly, all relevant risk and legal aspects that come with the holding of reserve assets,” she said, adding that the new rules give issuers and users confidence in stablecoins.

Under the new stablecoin framework, each issuer’s reserve assets must have a value of at least 100 per cent of the outstanding SCS in circulation at all times. Reserve assets are used as collateral and must be denominated in the same currency as the peg. These must be held in cash, cash equivalents or in three-month Singapore government bonds, among others.

Ms Angela Ang, senior policy adviser for blockchain intelligence firm TRM Labs, noted that there is still regulatory oversight for stablecoin-related activities excluded from this regime. For instance, secondary market activities such as trading are regulated under the Payment Services Act as DPT services.

As Singapore is one of the first movers in stablecoin regulation, alongside the European Union, Japan and Hong Kong, she said it is normal to continuously evolve.

Mr Lim Tung Li, senior policy adviser for the Asia-Pacific region at blockchain analysis firm Elliptic, said MAS recognises that the framework “will and must change in the future”.

He said the regulator will monitor both market and regulatory developments in order to refine the framework over time in areas such as multi-jurisdictional issuance and systemic stablecoins.

The crypto industry had earlier given its feedback on the new framework and many were not surprised by Tuesday’s announcement.

Mr Chia Hock Lai, co-founder of think tank Global Fintech Institute, said regulated stablecoins will give more confidence to end users, which will drive adoption and develop the digital asset market further.

But he said the “high requirements” will attract only well-capitalised players such as big banks.

Mr Chia added that the market will eventually have both regulated and unregulated stablecoins, each catering to different uses.

Ms Penny Chai, verification platform Sumsub’s vice-president for business development in the Asia-Pacific, noted that the market value for stablecoins is estimated to have surpassed US$100 billion and that “Singapore is evidently positioning itself as a hub for digital currencies, with a clear intention to attract foreign firms”.

But Mr Calvin Cheng, founder and chairman of Swiss digital asset firm Anchored Coins, thinks this will be trying.

The Singdollar is not a major global currency so there will be little global demand for a Singdollar-backed stablecoin, he said, adding that it is more logical to issue a euro-backed stablecoin in Europe.

He added that Singapore banks are very conservative and not digital asset-friendly, which makes it harder for industry players to operate here.

“What is crucial to the stablecoin business is to find a Singapore bank to accept deposits as reserves to back the stablecoins.”

Anchored Coins on Wednesday

issued two stablecoins on two major public blockchains

– one pegged to the euro and the other pegged to the Swiss franc. Both are backed on a one-to-one basis.

While market players generally think having the MAS-regulated label is positive, some pointed out that the Singapore market is too small and this hinders the industry’s development.

Elliptic’s Mr Lim said the SCS framework was introduced in the aftermath of the May 2022 Terra/Luna collapse, when there was increasing interest in stablecoins as a viable form of exchange between digital assets and traditional finance, and as scrutiny by global regulators grew.

The Singapore framework was developed out of a need to balance different priorities and fulfils the MAS’ regulatory approach of supporting stablecoins as an innovative payment use case and issuers as utility service providers, Mr Lim said.

He added that the framework is not meant to support the retail trading of stablecoins, which is allowed under the existing DPT regime but is frowned upon by MAS.