The framework sets criteria stablecoin issuers must achieve in order to be considered as subject to Monetary Authority of Singapore regulation.
Singapore, which is renowned for its innovative thinking, has made a huge advancement in the field of digital banking. The Monetary Authority of Singapore (MAS) presented a thorough regulatory scheme on August 15th in an effort to guarantee the stability of single-currency stablecoins (SCS) functioning under its control.
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MAS Unveils the Framework
This ground-breaking framework was introduced by MAS with the goal of fostering stability and confidence in the world of digital currencies. It notably targets stablecoins that are not issued by banks and tied to the Singapore dollar or other significant G10 currencies, such as the euro, British pound, and US dollar. Stablecoins with a circulation surpassing 5 million Singapore dollars, or roughly $3.7 million, are covered by the framework.
Ho Hern Shin, the Deputy Managing Director for Financial Supervision at MAS, emphasized that this framework is purposefully created to make stablecoins usable as trustworthy digital mediums of exchange, bridging the gap between conventional currency and the developing digital asset ecosystems.
Related: MAS proposes common protocol for digital money, trials underway in Singapore
The Pillars of the Framework
Stablecoin issuers must abide by the framework established by MAS in order to receive the desired MAS-regulated mark. These specifications include careful elements like reserve management, capital requirements, redemption dates, and thorough disclosures.
- Value Stability: The framework mandates that the composition, valuation, custody, and audit of reserve assets should provide a high level of assurance regarding value stability.
- Capital and Liquidity: Stablecoin issuers must maintain a minimum base capital and sufficient liquid assets. This approach mitigates the risk of insolvency and ensures a smooth winding down of operations if necessary.
- Prompt Redemption: Issuers are expected to promptly return the par value of stablecoins to holders within five business days from a redemption request.
- Transparency and User Protection: Adequate disclosures must be made to users, encompassing details about the stablecoin’s value stabilization mechanism, rights of holders, and audit results of reserve assets.
MAS stressed that only stablecoin issuers achieving these stringent conditions are allowed to apply for MAS-regulated status. This designation acts as a distinguishing feature, separating regulated stablecoins from their unregulated counterparts.
A strong caution against misrepresentation was given by MAS. Anyone who misrepresents a token as being MAS-certified will be subject to the new framework’s defined sanctions. These sanctions include financial penalties, jail time, and placement on a watch list.
Related: Singapore Red Cross Accepts Crypto Donations to Support Humanitarian Efforts
A public consultation that was performed in October 2022 produced helpful feedback that went into the creation of this updated regulatory framework. Although the framework is a big step forward, it’s important to note that more discussions and parliamentary changes are needed to fully implement these regulations. In the area of digital banking, Singapore is still a shining example of regulatory innovation.