Singapore’s financial regulator announced on Tuesday that stablecoin laws have been finalized, making it one of the first countries in the world to do so.
A sort of virtual money called a stablecoin is intended to maintain a fixed value in relation to a fiat currency. Many assert to be supported by a pool of real assets, including cash or government bonds.
The market for stablecoins is estimated to be worth $125 billion, with USDT and USDC from Tether and Circle, respectively, controlling almost 90% of it.
Stablecoins are, however, largely uncontrolled globally.
Some essential conditions are outlined in the framework of the Monetary Authority of Singapore (MAS):
- Stablecoin reserves must be kept in low-risk, highly liquid assets. They must always match or exceed the value of the stablecoin in use.
- Within five business days of receiving a redemption request, stablecoin issuers must give holders their digital currency’s par value back.
- Additionally, issuers are required to give users “appropriate disclosures” that may include reserve audit findings.
Stablecoins created in Singapore that imitate the Singapore dollar or any other G10 currency, such as the US dollar, will be subject to these regulations.
The regulator will acknowledge stablecoins as being MAS-regulated stablecoins if they satisfy all of the rules’ conditions. According to MAS, this will help to differentiate stablecoins from unregulated tokens.
Amid criticism of the U.S. regulatory structure from the crypto industry, Singapore has moved to promote itself as a hub for digital currencies in an effort to attract overseas businesses.
Historically, the foundation of cryptocurrency trading has been stablecoins like USDT and USDC. Without having to switch back to fiat money, they let traders move in and out of different digital coins. The proponents of stablecoin assert that the tokens have a wide range of additional uses, such as remittances.
Regarding the transparency of the reserves they maintain, stablecoin issuers have come under fire. The goal of Singapore is to make the market more transparent.
According to a statement by Ho Hern Shin, deputy managing director of financial supervision at MAS, the MAS stablecoin regulatory framework intends to make stablecoins more usable as a reliable digital medium of exchange and as a link between the fiat and digital asset ecosystems.
Tether and Circle, two stablecoin companies, praised the new guidelines.
Yam Ki Chan, vice president of strategy and policy for APAC at Circle, said in a statement that with the new stablecoin regulatory framework, MAS is one of a number of forward-thinking authorities globally who have established a clear and transparent legal framework for stablecoins and digital assets.
In a statement, Paolo Ardoino, CTO of Tether, said that, they applaud the Authorities for establishing a solid stablecoin framework that strikes an appropriate balance between innovation and customer safety. This framework offers a more definite structure and defines a well-defined roadmap for carrying out stablecoin activities in Singapore while guaranteeing openness and responsibility.
The collapse of the so-called algorithmic stablecoin UST last year made this kind of stablecoin a target for regulators. UST was managed by an algorithm and had no real-world assets, such as bonds, in its reserves, in contrast to USDT and USDC.
Singapore is among the first jurisdictions to implement such legislation due to its stablecoin framework. Although there aren’t any specific regulations yet, the U.K. passed a law in June that allows regulators to monitor stablecoins. In the meantime, Hong Kong is conducting a public survey on stablecoins and plans to enact rules next year.
