These papers were:
- Proposed Regulatory Measures for Digital Payment Token Services
- Proposed Regulatory Approach for Stablecoin-Related Activities
In 2019, MAS published a consultation paper relating to the scope of e-money and digital payment tokens (“DPT”). International regulatory developments and current industry issues triggered the need for a new consultation.
Stablecoins are defined by the Financial Stability Board (“FSB”) as crypto-assets that aim to maintain a stable value relative to a specified asset (typically a unit of fiat currency or commodity), or a pool or basket of assets.
MAS’ regulatory approach to stablecoins is framed by three key guiding objectives:
- Support the development of value-adding payment use cases for stablecoins, and stablecoin issuers
- Adopt a progressive regulatory approach that is fit for purpose and provides for stepping up of measures as needed
- Maintain an open regime to accommodate different forms of stablecoins
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Scope of Regulation
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- Single-currency pegged stablecoins (“SCS”). SCS known for having a stronger use case for payment and settlement
- SCS issued in Singapore – The immediate priority of MAS is to elevate the standard of SCS issued in Singapore
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Proposed regulatory framework and requirements for SCS issuers:
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Non-bank issuers
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- If the SCS in circulation exceeds or is anticipated to exceed S$5 million in value, the issuer will have to obtain a major payment institution (“MPI”) license
- If SCS issuers that do not exceed the size threshold for MPI will only need to obtain a standard payment institution (“SPI”) license
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Bank Issuers
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- MAS proposes not to impose additional reserve backing and prudential requirements on banks that issue SCS by tokenising liabilities of the bank
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Requirements imposed on regulated SCS issuers
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Reserve assets backing of SCS
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- Reserve assets must be equivalent to at least 100% of par value of the outstanding SCS in circulation at all times
- Reserve assets can only be held in the form of cash, cash equivalents, or debt securities
- Reserve assets must be denominated in the same currency as the pegged currency
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Reference currencies
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- MAS proposes to only allow the issuance of SCS that are pegged to the Singapore dollar or G10 currencies
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Timely redemption at par
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- SCS issuers must allow all the holders of SCS to have a direct legal right to redeem the SCS for the pegged currency at par value
- SCS issuers should return the par value no later than 5 business days from the day of the redemption request
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Prudential requirements for SCS issuers
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- Base capital – Higher of S$1 million or 50% of annual operating expenses of the SCS issuer
- Solvency – To always hold, liquid assets which are valued at higher of 50% of annual operating expenses
- Business restrictions – An SCS issuer is not allowed to undertake other activities that introduce additional risks to itself. (e.g., lending, trading or staking of SCS or other DPTs)
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Disclosure requirements
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- Requirement to issue a white paper to disclose details, including description of issuer, its project, rights and obligations related to the token (e.g., redemption, risks)
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SCS issued in multiple jurisdictions
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- Annual MAS attestation that other issuers of SCS are deemed to meet equivalent reserve backing and prudential requirement standards
- Establish regulatory cooperation among relevant regulatory bodies of the SCS to exchange information on operations of the SCS
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Implementation
MAS intends to issue final guidelines taking into considerations the responses to the consultation papers and is considering providing a transition period of 6 to 9 months starting from the time of publication for DPTSPS and SCS issuers to implement and comply with the guidelines.
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