Singapore: Stablecoin Regulatory Framework

Latest Developments

On 15 August 2023, MAS announced the features of a new regulatory framework, which is intended to ensure a high degree of value stability for stablecoins regulated in Singapore.

MAS also announced that it intends to introduce “stablecoin issuance service” as a new form of regulated activity by amending the Payment Services Act 2019, which governs payment services in Singapore.

These decisions follow a public consultation held by MAS in end-2022 on its proposed regulatory approach for stablecoin-related activities.

Summary

Stablecoins are DPTs that are intended to maintain a constant value against one or more fiat currencies. The MAS aims to regulate stablecoins to preserve value stability and serve as a trusted medium of exchange to support innovation, including the “on-chain” purchase and sale of digital assets.

MAS will introduce a single-currency stablecoin (SCS) framework that applies to single-currency stablecoins pegged to the Singapore Dollar or any G10 currency, that are issued in Singapore.

In connection with the new SCS framework, MAS plans to include “stablecoin issuance service” as a new regulated activity under the Payment Services Act 2019. Non-bank SCS issuers with SCS in circulation of SGD 5 million (approximately USD 3.75 million or EUR 3.5 million) or more will be required to obtain a major payment institution licence and comply with additional requirements under the new SCS framework.

Stablecoin issuers that meet the requirements under the SCS framework can label their DPTs as “MAS-regulated stablecoins”, which will enable consumers to distinguish them from other DPTs that are not subject to MAS’ stablecoin regulatory framework.

SCS issuers that do not exceed the SGD 5 million (approximately USD 3.75 million or EUR 3.5 million) threshold will only need a standard payment institution licence to provide regulated DPT services. They will not be subject to the additional requirements under the new SCS framework, which also means that cannot label their tokens as “MAS-regulated stablecoins”. Nevertheless, those that wish to be recognised as an issuer of “MAS-regulated stablecoins” can still choose to apply for a major payment institution licence provided they meet the additional requirements.

Key requirements under the SCS framework include:

• Value stability: SCS reserve assets will be subject to requirements relating to their composition, valuation, custody and audit, to give a high degree of assurance of value stability;
  
  
• Capital: issuers must maintain minimum base capital (higher of SGD 1 million (approximately USD 750,000 or EUR 700,000) or 50% of annual operating expenses) and liquid assets to reduce the risk of insolvency and enable an orderly wind-down of business if necessary;
  
  
• Redemption at Par: issuers must return the par value of SCS to holders within five business days from a redemption request; and
  
  
• Disclosure: issuers must provide appropriate disclosures to users, including information on the SCS’ value stabilising mechanism, rights of SCS holders, as well as the audit results of reserve assets. 

How could it be relevant for you?

SCS issuers should note the requirements under the new framework, which will be mandatory for those with SCS in circulation exceeding SGD 5 million (approximately USD 3.75 million or EUR 3.5 million) in value.

SCS issuers that do not exceed this threshold but would like their stablecoins to be recognised as “MAS-regulated stablecoins” can consider making an application to MAS on a voluntary basis provided that they meet the relevant requirements.

Next Steps

The government will need to make legislative amendments to the Payment Services Act 2019 to provide MAS with additional powers to regulate stablecoins under the new stablecoin regulatory framework. The relevant legislative amendments have yet to be published at this time. Companies that issue stablecoins should continue to monitor this space for further developments.

*Information is accurate up to 27 November 2023