MAS Finalises Stablecoin Regulatory Framework

The Monetary Authority of Singapore, MAS, has published a response paper to its consultation on a proposed new regulatory framework for issuers and intermediaries of stablecoins – that is digital currencies whose value is bound to another asset such as another currency. In this paper, MAS summarizes the responses it has received to its consultation, summarizes key amendments it has made to the draft framework, and outlines the final requirements that will apply in relation to the issuance or intermediation of single-currency pegged stablecoins (SCS).
#### Background
In view of the increasing use of cryptocurrencies, and particularly the use of stablecoins, MAS launched a consultation in October 2022 on a proposed regulatory framework for such. The framework would be part of the Payment Services Act 2019 and would only apply to issuers and intermediaries of single-currency pegged stablecoins. The key objective of MAS was to introduce core requirements as regards reserve management, redemption policies, prudential standards, and disclosures so as to foster a stable value of the SCS and create a minimum level of protection for users. The then proposed requirements are described in detail in EventID 18168 – the original consultation.
#### Responses to the proposed framework and subsequent changes to the draft version
Overall most respondents agreed with the proposed framework, although views varied on a number of issues, including, among others
– the capital requirements of issuers (suggested were S$1 million or 50% of annual operating expenses of the SCS issuer);
– the obligation to settle stablecoin transactions within three business days;
– the requirement of intermediaries to segregate customers’ MAS-regulated SCS from other customers’ assets;
– the diverging legal treatment of bank versus non-bank SCS issuers; or
– the currency of reserve assets (suggested was that such currency is the same as the pegged stablecoin currency).
In view of the comments received, MAS has made some changes to the draft version, the key ones of which are briefly noted below:
1. MAS will not require customers’ MAS-regulated single-currency pegged stablecoins to be „further segregated from customers’ other digital payment tokens.
2. MAS will permit foreign financial institutions to function as SCS custodians so long as they operate a branch in Singapore and are thus subject to MAS regulation and as long as they have at least an A- credit rating.
3. MAS will exclude from the scope of the SCS framework tokenised bank liabilities.
4. MAS will introduce an additional requirement of SCS issuers that obliges them to obtain – at the minimum – a yearly independent audit on the amounts of liquid funds necessary for an orderly wind-down.
5. For purposes of being recognized as a “MAS-regulated stablecoin” under the SCS regime, the issuance of the stablecoin will have to occur in Singapore. Multi-jurisdictional issuances will not be tolerated at the beginning of the new framework.
#### The final requirements
MAS has included a nice graphic depicting the final regulatory requirements of SCS issuers:
Graphic 1: Upcoming Requirements of SCS issuers

As far as the requirements on intermediaries are concerned, MAS will not require – as proposed – any additional licenses for transferring, brokering, or safeguarding stablecoins – other than the ones already obtained under the Payment Services Act 2019. The same holds true for disclosures. However, MAS will require intermediaries that are custodians to segregate customer accounts containing stablecoins from their own accounts and will require – again as proposed – to settle stablecoin transactions within three business days.