The Financial Regulator of Singapore has developed rules for stablecoin digital currencies. Reserves that support stablecoins should be held in low-risk, highly liquid assets. The level of reserves must always equal or exceed the amount of stablecoins in circulation. The stablecoin market is worth about $125 billion, with two tokens – USDT Tether and USDC Circle – accounting for about 90% of the total market cap.
Singapore’s financial regulator on Tuesday announced the completion of the development of rules for the digital currency stablecoin, becoming one of the first countries in the world to do so. A stablecoin is a type of digital currency designed to maintain a constant value against a fiat currency. They are assumed to be backed by a reserve of real assets such as cash or government bonds. But in the global market as a whole, stablecoins are not yet regulated.
The Monetary Authority of Singapore (MAS) has set some key requirements:
- Reserves that support stablecoins should be held in low-risk, highly liquid assets. They must always equal or exceed the value of the stablecoin in circulation;
- Stablecoin issuers are required to return digital currency holders their face value within five business days from the date of the redemption request;
- Issuers must also provide information “relevant information” Users, including the results of a reserve check.
These rules apply to Singapore-issued stablecoins that mimic the value of the Singapore dollar or another G10 currency like the US dollar. Stablecoins that meet all the requirements of the rules are recognized by the regulator “MAS-Regulated Stablecoins”. According to MAS, this will differentiate stablecoins from other unregulated tokens. Faced with the crypto industry’s criticism of the US regulatory regime, Singapore is positioning itself as a hub for digital currencies and is trying to attract foreign capital.
Last year, this type of cryptocurrency came under the radar of regulators with the collapse of a so-called algorithmic stablecoin called UST. Unlike USDT and USDC, UST was algorithmically driven and not backed by real assets such as bonds.
USDT and USDC stablecoins are used as the main tokens in cryptocurrency trading. They allow traders to get in and out of various digital coins without converting them back to fiat currency. Stablecoin issuers claim that tokens can be used for many other purposes, including money transfers. But stablecoin issuers have been criticized for being less transparent about the reserves they hold, and Singapore is trying to bring more clarity to the industry by drafting regulations.
“The MAS regulatory framework for stablecoins aims to facilitate the use of stablecoins as a trusted digital medium of exchange and as a bridge between the fiat and digital asset ecosystems.”are convinced of MAS.
“With the new regulatory framework for stablecoins, MAS joins the forward-thinking regulators around the world creating a clear and transparent regulatory framework for stablecoins and digital assets., said Yam Ki Chan, vice president of Circle, which manages the USDC stablecoin, which is pegged to the US dollar. — We thank the authorities for implementing a robust stablecoin structure that combines innovation and customer protection.”
The stablecoin regulations passed by the MAS make Singapore one of the first jurisdictions to develop and implement such regulations. In June, the UK passed legislation giving regulators the power to control stablecoins, but specific rules have yet to be released. Hong Kong is currently conducting public consultations and intends to introduce stablecoin regulation next year.