Stablecoin Tether and Circle USDC dominate the market.
Justin Tallis | AFP | Getty Images
Singapore’s financial regulator announced Tuesday that it has finalized rules for a type of digital currency known as stablecoins, making it the world’s first to do so.
A stablecoin is a type of digital currency designed to hold a fixed value against fiat currency. Many claim they are backed by reserves of real assets such as cash and government bonds.
The stablecoin market is worth about $125 billion, with two tokens – Tether’s USDT and Circle’s USDC — About 90% of the market capitalization.
However, stablecoins are not widely regulated around the world.
The Monetary Authority of Singapore (MAS) framework details some key requirements.
- Reserves backing stablecoins must be held as low-risk, highly liquid assets.Must always match or exceed the value of stablecoins in circulation
- Stablecoin issuers must return digital currency face value to holders within 5 business days of redemption request
- Issuers are also required to “appropriately disclose” to users the results of audits of reserves.
These rules apply to stablecoins issued in Singapore that mimic the value of G10 currencies such as Singapore Dollars or US Dollars.
Stablecoins that meet all requirements under the rules will be recognized as “MAS-regulated stablecoins” by regulators. This will distinguish between stablecoins and unregulated tokens, MAS said.
Singapore is trying to establish itself as a digital currency hub with the aim of attracting foreign companies amid criticism from the cryptocurrency industry over the US regulatory regime.
Stablecoins such as USDT and USDC have typically been the backbone of cryptocurrency trading. This allows traders to move in and out of various digital coins without reverting to fiat currency. Stablecoin issuers claim the tokens can be used for more purposes, such as remittances.
However, some stablecoin issuers have been criticized for the transparency of their reserves. Singapore aims to make the industry more defined.
“The MAS Stablecoin Regulatory Framework aims to facilitate the use of stablecoins as a trusted medium of digital exchange and as a bridge between fiat currencies and the digital asset ecosystem,” said the MAS Financial Supervisory Division. Deputy Managing Director Ho Han Singh said. statement.
Stablecoin companies Tether and Circle welcomed the new rules.
“With the new stablecoin regulatory framework, MAS joins the world’s leading regulators in establishing a clear and transparent regulatory framework for stablecoins and digital assets,” said Vice President of APAC Strategy and Policy at Circle. said Yam Ki Chang of CNBC said in a statement.
“We applaud the authorities for introducing a robust stablecoin framework that balances innovation and customer protection.”
“This framework provides a clearer structure and establishes a clear path for stablecoin operations in Singapore while ensuring transparency and accountability,” said Tether CTO Paolo Ardoino in a statement. told CNBC.
Last year, the collapse of the so-called algorithmic stablecoin named UST made this type of stablecoin a target for regulators. Unlike USDT and USDC, UST was governed by algorithms and had no real-world assets such as bonds in its reserves.
The Singapore stablecoin framework is one of the first jurisdictions to have such a rule. The UK passed a law in June giving regulators the power to oversee stablecoins, but there are no specific rules yet. Meanwhile, Hong Kong is in public talks on stablecoins and aims to introduce regulations next year.
