Leading cryptocurrency haven Singapore is taking steps to increase regulation in the cryptocurrency industry. The regulatory body in charge of monetary policy, the Monetary Association of Singapore (MAS), published two consultation papers proposing strict measures for stablecoin issuers and cryptocurrency trading.
The Monetary Authority of Singapore (MAS) has proposed two consultation papers that would establish several regulations to protect consumers from cryptocurrency trading while continuing to support the development of stablecoins.
Singapore Central Bank: Cryptocurrencies are one component of the larger digital asset industry
The Singapore Central Bank has recognized the potential benefits of cryptocurrencies in the digital asset industry and will not be banning them entirely. Instead, the MAS is proposing measures to reduce risks and protect consumers while still supporting innovation in the industry.
The Singapore Central Bank is proposing rigorous new requirements for the issuance of the DPT token, or digital payment token. These tokens, commonly known as stablecoins, are cryptocurrencies that have their value pegged to a fiat currency or an asset such as gold.
The MAS is proposing strict measures for the issuance and use of DPTs, including capital requirements, external audits, and a framework for managing risks as they are designed to bottleneck the usage of cryptocurrency trading by individuals.
The regulatory requirements proposed are requisite testing of the stability and reliability of stablecoins, as well as measures for monitoring their use in the market.
Regulatory requirements for DPT services providers
The MAS is also proposing a framework for cryptocurrency intermediaries, such as exchanges, to protect consumers from risks associated with trading digital assets and prevent money laundering and terrorist financing activities. The proposed framework includes licensing requirements, capital adequacy standards, cyber hygiene standards, a ban on lending activities, and acceptance of credit card payments when buying crypto. The MAS also imposed an immediate ban on celebrity endorsements, free gifts, and discounted rates for digital token investment as well as free gifts
The MAS also proposes the separation of customer assets from the assets of digital token intermediaries to ensure that customer funds are protected. The firms will also be required to introduce precise risk management measures and make the selection and listing of tokens’ policies and procedures public.
Stablecoins to be used as a medium of exchange
The MAS emphasized that stablecoins have the potential to be used as a medium of exchange and store of value. Still, more rigorous measures are necessary in order to ensure their stability. The regulatory approach is speculatively reducing the cryptocurrency trading and use of decentralized tokens but instead promoting the use and development of stablecoins.
The current regulatory framework, which mainly covers issues related to money laundering and terrorism funding as well as technical and cyber risks, will be broadened in an effort to ensure that authorized stablecoins have a high level of value stability.
In order to accomplish recovery or a smooth wind-down, non-bank stablecoin issuers will also be obliged to keep liquid assets valued at a higher percentage of yearly operating expenses than 50%.
These proposals come as cryptocurrencies have become increasingly popular in Singapore, which is a leading fintech hub in Southeast Asia, as it recently hosted the World Blockchain Summit in July this year. The MAS aims to establish a regulatory framework for digital assets that supports innovation and development while also protecting consumers and the financial system’s stability. There will be no extra backup or prudential requirements for banks when SCS is issued as a tokenized form of bank liability.