MAS Mulling Stablecoin Regulation in the Wake of TerraUSD and Luna Collapse

The Monetary Authority of Singapore (MAS) is actively reviewing its approach to the regulation of stablecoin in the wake of the collapse of the TerraUSD (UST) and Luna tokens, and will consult the public in the coming months.

The regulator is looking into a framework that is tailored to the specific characteristics and risks of stablecoins such as regulating the reserve requirements and the stability of the peg.

In a parliamentary response, Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS said that spillovers to the mainstream financial system and the economy remain limited at this point despite this turmoil.

He went on to add that while data on cryptocurrency holdings among the Singapore public are not available, statistics collected by the regulator show that banks in Singapore have insignificant exposures to the cryptocurrency ecosystem.

Currently, stablecoins, together with other cryptocurrencies such as Bitcoin, are considered digital payment tokens (DPTs) under the Payment Services Act.

The regulatory regime for DPT services under the Act primarily targets money laundering / terrorism financing and technology risks although MAS intends to take a more comprehensive approach to crypto regulations to include consumer protection as well.

According to Tharman, the definition of DPT services will be expanded to include, for instance, the transfer of DPTs and provision of custodian wallet services for DPTs, when the amendments to the Payment Services Act take effect.

MAS has repeatedly warned the public that the trading of DPTs is highly risky and banned the marketing or advertising these services in public areas in Singapore.

Tharman Shanmugaratnam

Tharman Shanmugaratnam

Tharman said,

“Our main focus has been on innovations in distributed ledger technologies that can enhance efficiencies in key wholesale market activities such as trade finance, cross-border payments, and the capital markets. MAS is working closely with the industry on these areas.

 

MAS has been focused on this broader ecosystem aimed at real use cases, rather than cryptocurrencies, which form a small part of the digital asset ecosystem. We have been very selective in licensing cryptocurrency players as DPT service providers. We will also continue to actively discourage retail participation in cryptocurrency trading, which as MAS has repeatedly warned is plainly hazardous.”

 

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