Making the dawn of new age, The Monetary Authority of Singapore (MAS) announced its rules for using and adapting a stablecoin cryptocurrency. Singapore is one of the earliest in setting the bar by finalizing stablecoin regulations. This stablecoin crypto regulation framework puts Singapore in a pioneering position globally, laying a foundational model for other jurisdictions.
What are stablecoins?
Stablecoins are cryptocurrencies that are backed by a fiat financial investment. The value of stablecoin cryptocurrencies is pegged to other financial commodities like US Dollars, Gold, or anything that aim to provide an alternative to popular cryptocurrencies’ high volatility, making them less suitable for day-to-day transactions.
With the stablecoin market growing to $125 billion, Tether’s USDT and Circle’s USDC are leading the way, making up 90% of the total market value.
However, the absence of proper regulation has cast a shadow of uncertainty over using stablecoins worldwide.
Understanding Stablecoins Crypto Regulations and Singapore’s Role
The Monetary Authority of Singapore (MAS) framework focuses on some of the significant requirements that underpin the volatility and substantial stability of stablecoin.
- Elevated Reserve Standards: A key pillar of MAS’ framework focuses on the pegged financial instruments that should ensure low risks in security and highly liquid assets. This measure ensures that the value of reserves consistently equals or surpasses the circulating supply of stablecoin.
- Swift Redemption in Stablecoin Crypto Regulations: Stablecoin issuers are compelled to expedite the redemption of the digital currency’s par value within a tight five-business-day window upon receiving redemption requests.
- Transparency Through Disclosure: A hallmark of the regulatory framework is to ensure stablecoin issuers must offer transparent disclosures to users, encompassing comprehensive audit results about the reserves backing the digital currency.
The MAS framework extends its jurisdiction to encompass stablecoins closely mirroring the value of the Singapore dollar or any G10 currency, including the US dollar. Stablecoins that meet these regulatory requirements will be labeled “MAS-regulated stablecoins,” setting them apart from their unregulated counterparts.
Stablecoin Crypto Regulation and Safer Cryptocurrencies
To become a digital currency hub, Singapore is actively attracting international companies, especially in response to concerns from the crypto industry regarding the U.S. regulatory system.
Stablecoins like USDT and USDC have traditionally played a central role in cryptocurrency trading, enabling traders to switch between digital assets smoothly without converting to traditional fiat currency. Stablecoin issuers highlight their versatility, emphasizing their potential for broader applications, such as facilitating remittances.
Critiques have emerged regarding the transparency of reserves held by stablecoin issuers. In response, Singapore is actively working to enhance clarity within the industry.
Singapore Advancements in Cryptocurrency
Ho Hern Shin, the Deputy Managing Director of Financial Supervision at MAS, explained the aim of the stablecoin regulatory framework: “MAS’ stablecoin regulatory framework is designed to foster the utilization of stablecoins as a trustworthy digital medium of exchange and as a pivotal link between traditional fiat and the digital asset ecosystems.”
Stablecoin firms like Tether and Circle approved Singapore’s new framework implementation.
Yam Ki Chan, the vice president of strategy and policy for APAC at Circle, stated in a CNBC statement that with the new stablecoin regulatory framework, MAS has positioned itself among forward-looking regulators globally. The objective is to establish a regulatory framework that is clear and transparent for stablecoins and digital assets.
A statement expressed appreciation for the Authorities’ introduction of a strong stablecoin Crypto regulations framework, which effectively balances innovation and the protection of customers.
Paolo Ardoino, the CTO of Tether, conveyed to CNBC that this framework establishes a more distinct structure and a well-defined pathway for conducting stablecoin operations in Singapore. The emphasis remains on maintaining transparency and accountability throughout this process.
Last year, a famous algorithmic stablecoin called UST suffered a collapse. This problem caught the attention of regulators because UST was different from stablecoins like USDT and USDC. A computer algorithm controlled UST and didn’t have real-world assets like bonds in its reserves.
Concluding Thoughts
Singapore has now introduced rules for stablecoins, making it one of the first places to do so. In June, the U.K. passed a law that lets regulators watch over stablecoins, but there aren’t clear rules yet. Hong Kong also talks to the public about stablecoins and plans to make rules for them next year.
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