SINGAPORE – Singapore-licensed stablecoin issuers will have to meet requirements including having a minimum amount of reserves and allowing investors timely redemption at par value.
The stablecoins issued in Singapore can be pegged only to the Singdollar or any Group of 10 currency, including the United States dollar and Japanese yen, said the Monetary Authority of Singapore (MAS).
The regulator on Tuesday issued its responses to an earlier consultation paper on proposed rules for stablecoins issued in Singapore.
Issuers’ valuation of their reserve assets has to be at least 100 per cent of the outstanding single-currency stablecoins (SCS) in circulation at all times. Reserve assets, to be denominated in the same currency as the peg, must be held in cash, cash equivalents or in three-month Singapore government bonds.
MAS said it would go ahead with the proposed requirement for SCS issuers to hold reserve assets in segregated accounts which are separate from their own assets.
Instead of the original suggestion to have custody of assets maintained only by Singapore-licensed custodians, overseas-based custodians will now be allowed. These overseas custodians must have a minimum credit rating of A-, and must have a branch in Singapore that is regulated by MAS.
The regulator will also require the reserve assets to be independently documented and confirmed on a monthly basis. These are to be published on the issuer’s website.
Issuers must have a base capital of either $1 million or 50 per cent of their annual operating expenses, whichever is higher. At the same time, they will need to hold liquid assets valued at more than half of their annual operating expenses, or an amount needed to achieve recovery or an orderly wind-down.
On redemption, issuers must return the par value of MAS-regulated SCS to holders within five business days.
As it is currently difficult to monitor and verify the adequacy and availability of reserve assets held overseas, MAS said that for a start, it would not allow multi-jurisdictional issuances. So, SCS issuers have to issue solely out of Singapore.
Banks that issue SCS by tokenising their liabilities would not need additional reserve backing or prudential requirements, given that the lenders are already subject to conditions under the Banking Act.
The regulator said it intends to hold a public consultation on the legislative amendments for stablecoins in 2024.
Ms Ho Hern Shin, deputy managing director for financial supervision at MAS, said: “MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems. We encourage SCS issuers who would like their stablecoins recognised as ‘MAS-regulated stablecoins’ to make early preparations for compliance.”
This comes after MAS published in October 2022 two consultation papers that outlined proposed rules for stablecoins, as well as measures to restrict retail crypto speculation and regulate the business conduct of crypto service providers.
The measures in the two papers come under the Payment Services Act, which covers crypto service providers.
In early July 2023, the regulator announced new finalised measures that will ring-fence Singapore customers’ assets in a move meant to avoid a repeat of the huge losses that occurred when cryptocurrency firms went bust in 2022.
For instance, digital asset firms licensed in Singapore have to not only segregate customers’ assets from their own, but also hold them on trust. Digital payment token service providers will also be restricted from facilitating lending or staking of their retail customers’ tokens, while institutional and accredited investors are unaffected. These new rules are expected to kick in later in 2023.
Currently in Singapore, StraitsX offers a stablecoin pegged to the Singdollar.
