SINGAPORE Trends and Developments Contributed by: Adrian Ang, Alexander Fong and Benjamin Samynathan, Allen & Gledhill LLP
on the open market; or (ii) through backing by reserve assets denominated in the currency of the stablecoin itself ( “single-currency stable- coins” or “SCS” ). The use-cases of stablecoins are myriad, but their three primary use-cases may be summa - rised as: (i) operating as a payment settlement layer; (ii) operating as a store of value; or (iii) functioning as an intermediary on-ramp or off- ramp asset to other cryptocurrencies, whether for the purpose of cryptocurrency trading, pay - ment or otherwise. Accordingly, given the increase in mainstream adoption of cryptocurrencies and the increased use-cases for stablecoins as a payment set - tlement layer in cross-border transactions, we would expect there to be an increased push toward SCS regulation. In specific relation to Singapore, “stablecoins” are currently viewed as “digital payment tokens” (DPTs), similar to other types of large-cap cryp - tocurrencies such as bitcoin, ethereum or ripple. Accordingly, entities that provide regulated “pay- ment services” involving “stablecoins” (including issuance) may currently be subject to licensing requirements under the Payment Services Act 2019 (the “PS Act” ), supervised by MAS, for pro - viding “DPT services” . Notwithstanding the above, on 15 August 2023, MAS announced the features of a new sta - blecoin regulatory framework, to ensure “high degree of value stability for stablecoins regulated in Singapore” . While this framework has not yet come into effect, MAS’ public announcement of the features of this upcoming framework has attracted even more stablecoin issuers to explore setting up in Singapore.
The framework will apply to any SCS that is issued in Singapore and pegged to the Singa - pore dollar or any G10 currency, and will impose key requirements relating to the following. • Stability of value and composition of reserve assets. This includes ensuring that reserve assets are composed of low-risk assets that are highly liquid and are custodised with MAS-regulated custodians with a minimum credit rating of “A-” , as well as to be subject to monthly audit and independent attestation requirements. • Capital requirements. This includes imposing a base capital requirement of SGD1 million or 50% of the SCS issuer’s annual operat - ing expenses, whichever is higher. Further, there are business restrictions on SCS issuers undertaking any other activities that introduce additional risks (eg, restrictions on investing in and extending loans, lending or staking SCS and other DPTs, fund management). • Redemption at par. This includes ensuring that SCS holders have a direct legal claim for redemption at par, and that such requests can be made at any time and will be met no later than five business days. • Disclosure requirements. There are also requirements for the white papers of such SCS to be disclosed, containing prescribed information including general information on the issuer, the value-stabilising mechanism, risks, and rights and obligations related to the SCS. SCS issuers will need to be regulated under the PS Act for providing “stablecoin issuance ser- vice” , and SCS that fulfil all requirements under the framework may additionally apply to MAS for their stablecoin to be “MAS-regulated stable- coins” , labelled as such to distinguish them from
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