Singapore urges stablecoin issuers to prepare for 2024 framework

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has finalized a regulatory framework for stablecoins requiring regulated issuers to hold necessary reserves on hand.

The framework will apply to single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency issued within its borders, according to a statement on Tuesday.

SCS issuers will have to comply with new rules, including maintaining reserve assets that are sufficient to back their value, as well as holding minimum base capital and liquid asset requirements.

Redemptions of SCS at par will also be required from issuers within five business days while information on the tokens’ value, stabilizing mechanism and rights of holders, as well as the audit results of reserve assets, will also be mandated.

“The revision of MAS’s regulatory framework is a commendable step towards a more resilient and transparent digital financial ecosystem,” Chen Zhuling, CEO of Singapore-based RockX told Blockworks.

“By instating well-defined parameters that include segregating customers’ stablecoins with custodians having a minimum credit rating of A- and requiring monthly attestation of reserves, Singapore is fortifying trust in an evolving digital currency landscape,” Zhuling said.

MAS views unregulated stablecoins as a risk both to its domestic market and to retail investors. Definitive rules for the sector have continued apace following the demise of Singapore-based Terra’s failed algorithmic stablecoin in May of last year.

Its latest framework on digital assets takes into account feedback received from a public consultation in October 2022. MAS recently moved against crypto staking, banning retail investors from the activity within its borders last month.

Only stablecoin issuers that meet all requirements under the framework will be eligible to apply in order for their assets to be recognized and labeled as “MAS-regulated stablecoins,” the regulator said.

Failure to meet those requirements will result in penalties or fines. Actual penalties for violating the MAS stablecoin regulatory framework have not been finalized yet. Similar penalties for other financial crimes can attract fines of up to SGD 1 million ($737,000) and imprisonment of up to 10 years.

“We encourage SCS issuers who would like their stablecoins recognized as ‘MAS-regulated stablecoins’ to make early preparations for compliance,” Ho Hern Shin, deputy managing director of Financial Supervision at MAS said in the statement.

The director also 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.” 

The framework is expected to come into effect in the first half of 2024.

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