SINGAPORE Law and Practice Contributed by: Tju Liang Chua and Ulanda Oon, Drew & Napier LLC
On a related note, payment tokens are regulated as DPTs under the PS Act. Under the PS Act, a DPT is defined as “any digital representation of value (other than an excluded digital representation of value) that: (a) is expressed as a unit; (b) is not denominated in any currency, and is not pegged by its issuer to any currency; (c) is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt; (d) can be transferred, stored or traded electronically; and (e) satisfies such other char- acteristics as [MAS] may prescribe”. Cryptocurrencies such as Bitcoin (BTC) and Ether (ETH), as well as stablecoins such as Tether (USDT) and USD Coin (USDC), will generally be regarded as DPTs under the PS Act. The following types of digital assets are notably exempted PS Act’s remit: • “limited-purpose DPTs” – these are non-monetary consumer loyalty or reward points, or in-game assets or similar digital representations of value, which cannot be returned to the issuer or sold, transferred or exchanged for money; and • “central bank DPTs”. These are DPTs issued by a central bank or entity authorised by a central bank to issue a DPT on behalf of the central bank (ie, CBDCs). 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins The MAS has clarified that most stablecoins today may be regulated as DPTs rather than as e-money. There is therefore no distinction in treatment between algorithmic stablecoins and asset-backed stablecoins (see also 6.1 Payments ). In 2024, the MAS also finalised its new stablecoin framework. This framework will apply to single-cur- rency stablecoins issued in Singapore that are pegged to either the SGD or any G10 currency. The MAS will be expanding the regulatory regime under the PS Act to include a new PS known as a “sta- blecoin issuance service” (SIS), which will cover the issuance of single-currency stablecoins whose circu-
lation value exceeds SGD5 million and are issued by an entity based in Singapore. Only stablecoins backed by very low-risk reserve assets (such as cash, cash equivalents or certain short-term debt securities) will fall within this new regulatory framework, and they will be labelled as “MAS-regulated stablecoins”. Issu- ers of these stablecoins are required to hold reserve assets equivalent to at least 100% of the par value of the outstanding single currency stablecoins in circula- tion at all times (including those held by the issuer). Furthermore, the reserve assets must be denominat - ed in the same currency as the pegged currency of the stablecoin, with the value of such reserve assets calculated daily on a mark-to-market basis. These issuers are also required to maintain reserve assets in distinct, segregated accounts separate from their own non-reserve assets. These segregated accounts may be held with FIs licensed for custodial services in Singapore by MAS, or by overseas-based custo- dians provided that certain conditions are met. The base capital requirements for a SIS provider will be higher than those required of e-money issuers and DPTSPs regulated under the current PS Act – ie, the higher of SGD1 million or 50% of the annual operating expenses of the issuer. In terms of business restrictions, under the new SIS, MAS does not intend to allow an issuer of MAS-reg- ulated stablecoins to take on business offerings such as lending services, dealing or fund management ser- vices, which introduce additional risks to the issuer. That said, such activities can still be conducted from other related entities that the issuer does not have a stake in. It is unlikely that algorithmic stablecoins can satisfy these requirements for the issuers to be regulated as SIS. These issuers will be regulated under the existing PS Act as DPTSPs instead. 6.2.2 Stablecoin Regulation See above 6.2.1 Fiat Currency and Algorithmic Sta- blecoins . 6.2.3 Backing Assets While the business restrictions imposed on the DPT- SPs could constrain the issuer’s ability to pay interest or yield in certain ways (see 6.2.1 Fiat Currency and
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