MAS Announces Plan to Consult Public on Stablecoin Regulation

The Monetary Authority of Singapore (MAS) is currently assessing its approach to stablecoin regulation following the collapse of algorithmic stablecoin TerraUST (UST-USD) in May 2022. According to Central Bank minister Tharman Shanmugaratnam, MAS plans to consult the public in the coming months as the agency assesses the merits of a regulatory regime that targets “the specific characteristics and risks” of stablecoins. 

In response to a question during a parliamentary session on August 1, Shanmugaratnam noted some of the areas MAS will be “actively assessing,” including regulating reserve requirements and the stability of stablecoins’ peg against the value of a fiat currency.  

Singapore’s consideration of its overarching regulatory approach towards stablecoins follows the country’s Financial Services and Markets (FSM) Bill, which enhanced the powers of MAS and addressed regulatory weaknesses in the cryptoasset space. The move also aligns with the global effort by regulators to build and extend their anti-money laundering and combatting the financing of terrorism (AML/CFT) regulations to better reflect the shifting crypto and stablecoin landscape. 

Stablecoin reserve requirements 

MAS Managing Director, Ravi Menon, discussed the agency’s approach to the crypto ecosystem at the Financial Times’ Crypto & Digital Assets Summit in April this year. Regarding stablecoin regulation, Menon said there needs to be a level of surety regarding the extent to which stablecoin backing is liquid and available when required. 

While Shanmugaratnam confirmed that the impact of Terra’s collapse on Singapore’s economy was minimal, MAS will continue to work on stablecoin regulation and utilize feedback from the public to inform its direction. 

“From a developmental perspective, MAS’ aim has been and remains to enable the growth of an innovative and responsible digital asset ecosystem,” said Shanmugaratnam. 

A focus on standard setting

Standard setting within crypto markets remains a global concern for regulators and governments alike. Alongside MAS’s upcoming guidance on stablecoin usage, the Financial Stability Board (FSB) will propose the first global crypto rules in October this year. 

In June 2022, the Financial Action Task Force (FATF) released its “Targeted Update on Implementation of FATF’s Standards on Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs).” In the report, the FATF cited its commitment to facilitate discussion between jurisdictions and other standard-setting bodies on stablecoin implementation issues. 

Key takeaways

As stablecoin regulation, and crypto in general, remains subject to scrutiny across the globe, compliance staff should stay abreast of any new or updated guidance. Even guidance issued in jurisdictions outside of a firm’s operational scope should be assessed, as regulators are likely to review existing regulatory guidance to help inform their direction of travel. 

Firms based in Singapore should also be attentive to any upcoming calls from MAS inviting feedback from the public regarding future stablecoin regulation.