Singapore opens to stablecoins – once they jump through some hoops
After regulators are done with them, providers will look a lot like boring old banks
The Monetary Authority of Singapore (MAS) endorsed the use of stablecoins on Tuesday, when it released a regulatory framework for the digital assets that allows their use provided their operators implement protections for owners.
"When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium of exchange to support innovation, including the 'on-chain' purchase and sale of digital assets," declared MAS, the city-state's reserve bank.
MAS will allow single-currency stablecoins pegged to the Singapore Dollar or other G10 currency, issued in Singapore, with full cash withdrawals available within five days of a customer's request.
Issuers must have minimum base capital of one million Singapore dollars, or half of their annual operating expenses. They must also keep equivalent capital and liquid assets to avoid insolvency and cope with the aftermath of such events – should the business crater in the manner of Terraform Labs' not-very-stable-after-all TerraUSD instrument.
Stablecoin providers that can fulfil all those requirements will receive a "MAS-regulated stablecoins" stamp of approval, which will tell the world their instruments offer a level of safety similar to other financial instruments. Singapore will gain the distinction of being one of the few countries that allows transactions in this form of digital currency.
"Users should make their own informed decisions on the accompanying risks should they choose to deal in stablecoins that are not regulated under MAS's framework," warned the Authority.
MAS deputy managing director Ms Ho Hern Shin said the 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."
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In the past, the city-state has used strong language when discussing cryptocurrencies and those who allow them to be traded or used for transactions. MAS chief fintech officer Sopnendu Mohanty vowed last year to be "brutal and unrelentingly hard" on any industry player exhibiting bad behavior. In April 2022, minister of state Alvin Tan warned that "there may be reputational risks to Singapore in respect of DT [decentralized token] service providers created in Singapore but that provide DT services overseas."
The comment pressaged the crashes of Singapore-headquartered companies Terraform Labs, Vauld and Three Arrows Capital.
But in October 2022 MAS commenced a public consultation on stablecoins, and the following month Mohanty expressed some support for the digi-dollars – at least when "well-regulated."
The chief fintech officer said they could "become a disruptive low value transfer cross-border process" and "create a competitive, low value efficient transport system."
Singapore has also moved to regulate outfits that deal in crypto and other forms of digital payment. From the end of 2023, the tropical nation will require digital payment operators to follow the same sort of regulations and customer protection requirements as traditional financial institutions.
Regulation of a sort familiar to the mainstream financial services industry has shown itself to be an effective protective mechanism for cryptocurrency-related technologies in places like Japan.
Consider the collapse of FTX. The Japanese outpost of the now defunct Sam Bankman-Fried brainchild became the only locale where customers were able to withdraw funds following its collapse.
Japan's law required crypto companies to register with the Financial Services Agency, demonstrate compliance with anti-money-laundering laws, set aside capital reserves, and separate customer and exchange assets.
Singapore's stablecoin plan makes it look like local regulators were taking notes. ®