TLDR
- Singapore’s central bank is preparing to regulate unregulated stablecoins to maintain financial stability.
- MAS managing director Chia Der Jiun warned that unregulated stablecoins struggle to maintain their value peg.
- The central bank’s new regulatory framework aims to ensure stablecoins have reliable reserve backing and redemption guarantees.
- Only well-capitalized and fully supervised stablecoin issuers will be eligible for recognition in Singapore’s financial system.
- MAS is testing the use of wholesale central bank digital currencies and tokenized bank liabilities through its BLOOM initiative.
Singapore’s central bank is taking action to address the growing concerns surrounding unregulated stablecoins. The Monetary Authority of Singapore (MAS) has signaled upcoming changes to protect the integrity of the country’s financial ecosystem. MAS managing director Chia Der Jiun highlighted the need for stability in the digital currency sector, particularly for stablecoins.
Unregulated Stablecoins Face Increased Scrutiny in Singapore
In a keynote speech at the Singapore FinTech Festival, Chia warned about the instability of unregulated stablecoins. He pointed out that these digital assets have struggled to maintain their pegs, calling their records “patchy.” Chia compared the risks of depegging to the 2008 money-market fund crisis, which caused widespread financial instability.
Chia emphasized that unregulated stablecoins are unsuitable for large, wholesale transactions. He said, “While agility is a strength, stability needs to be reinforced.” The MAS is working to ensure that only well-regulated stablecoins can function as reliable settlement assets in Singapore’s financial ecosystem.
MAS has finalized a regulatory framework to govern single-currency stablecoins. Released in August, the framework focuses on ensuring that stablecoins have reliable reserve backing and redemption guarantees. Chia emphasized that these are essential requirements for any stablecoin to be considered a credible settlement asset.
The central bank’s approach will differentiate between fully regulated stablecoins and others in the market. Chia stated that only well-capitalized and thoroughly supervised issuers will be eligible for recognition. He also noted that the regulatory framework will evolve as the role of stablecoins in financial systems expands.
Future of Settlement Assets and Tokenized Systems in Singapore
Chia also discussed MAS’s broader vision for other digital settlement assets. This includes the development of wholesale central bank digital currencies (CBDCs) and tokenized bank liabilities. Through its BLOOM initiative, MAS is testing how these technologies can operate in a tokenized financial system.
The MAS is working closely with financial institutions to explore the practical applications of CBDCs, stablecoins, and tokenized assets. Financial institutions and clearing networks are encouraged to participate in these trials under the BLOOM initiative. Chia’s comments underscore Singapore’s commitment to innovation while ensuring the stability of its financial infrastructure.
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