Singapore's financial regulator announced on Tuesday that stablecoin laws have been approved, making it one of the first countries in the world to do so.
A sort of virtual money called a stablecoin is intended to maintain a fixed value in relation to a fiat currency. Many assert to be supported by a pool of real assets, including cash or government bonds.
The stablecoin market is estimated to be worth $125 billion, with USDT and USDC from Tether and Circle, respectively, controlling almost 90% of the market capitalization.
However, stablecoins are largely unregulated globally.
Some essential conditions are outlined in the framework of the Monetary Authority of Singapore (MAS):
Stablecoin reserves must be kept in low-risk, highly liquid investments. They must always match or exceed the value of the stablecoin in use.
Within five business days of receiving a redemption request, stablecoin issuers are required to give holders their original investment back in full.
Additionally, issuers are required to give users "appropriate disclosures" that may include reserve audit findings.
In response to criticism of the U.S. regulatory system from the cryptocurrency industry, Singapore has attempted to promote itself as a global hub for digital currencies in an effort to attract foreign businesses.
The foundation of cryptocurrency trading has traditionally been stablecoins like USDT and USDC. They enable trading without changing back into fiat currency between various digital coins. The creators of stablecoins claim that there are numerous additional uses for the tokens, including money transfers.
However, stablecoin issuers have come under fire for their lack of transparency over the reserves they retain. Singapore wants to make the market more transparent.
According to Ho Hern Shin, deputy managing director of financial supervision at MAS, "MAS' stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange and as a bridge between the fiat and digital asset ecosystems."
Yam Ki Chan, vice president of strategy and policy for APAC at Circle, said in a statement to CNBC: "With the new stablecoin regulatory framework, MAS is among a set of forward-looking regulators globally in establishing a clear and transparent regulatory framework for stablecoins and digital assets."
We applaud the Authorities for establishing a solid stablecoin framework that strikes a balance between innovation and customer safety.
The collapse of the so-called algorithmic stablecoin UST last year made this kind of stablecoin a target for regulators. UST was managed by an algorithm and had no real-world assets, such as bonds, in its reserves, in contrast to USDT and USDC.
Singapore is among the first jurisdictions to implement such legislation thanks to its stablecoin framework. Although there aren't any specific regulations yet, the U.K. passed a law in June that allows regulators to monitor stablecoins. In the meantime, Hong Kong is conducting a public survey on stablecoins and plans to enact rules next year.