
Knowledge Highlights 26 September 2023
Knowledge Highlights 1 November 2022
On 26 October 2022, the Monetary Authority of Singapore (“MAS”) published two consultation papers setting out proposed regulatory measures to reduce the risk of consumer harm from trading in digital payment tokens (“DPTs”) and to support the development of stablecoins as a credible medium of exchange in the digital asset ecosystem. These measures will be part of the Payment Services Act 2019 (“PS Act”). Both consultations close on 21 December 2022.
Consultation on proposed regulatory measures for DPT services
The consultation paper on Proposed Regulatory Measures for Digital Payment Token Services sets out proposed regulatory measures for licensees and exempt payment service providers that carry on a business of providing a DPT service under the PS Act (“DPT Service Provider”).
MAS is of the view that trading in DPTs (more commonly known as cryptocurrency) is highly risky and not suitable for the general public. However, DPTs play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them. Therefore, to reduce the risk to consumers from speculative trading in DPTs, MAS will require that DPT Service Providers ensure proper business conduct and adequate risk disclosure.
The proposed measures fall broadly into the following areas.
Consumer access measures
Business conduct measures
Managing technology and cyber risks
MAS proposes to mandate the requirements in the Notice of Technology Risk Management that are currently applicable to other types of financial institutions, such as banks, to DPT Service Providers.
Market integrity
MAS seeks comments on effective systems, procedures and arrangements that DPT trading platform operators should implement, in order to promote fair, orderly, transparent trading of DPTs offered for sale on their trading platform.
MAS also seeks comments on effective measures to detect and deter unfair trading practices, including the implementation of market surveillance mechanisms.
Consultation on proposed regulatory approach for stablecoin-related activities
The consultation paper on Proposed Regulatory Approach for Stablecoin-related Activities sets out a proposed framework to regulate stablecoin issuers and intermediaries.
MAS is of the view that stablecoins have the potential to be a medium of exchange to facilitate transactions in the digital asset ecosystem, provided they are well-regulated and securely backed. The current regulatory framework, which primarily addresses money laundering and terrorism financing risks, and technology and cyber risks, will be expanded to ensure that regulated stablecoins have a high degree of value stability.
MAS intends to focus its regulatory regime on single-currency pegged stablecoins (“SCS”). MAS will regulate the issuance of SCS where the value of SCS in circulation exceeds S$5 million. The key proposed issuer requirements relate to the following:
Banks in Singapore will be allowed to issue SCS as well, and no additional reserve backing and prudential requirements will apply when the SCS is issued as a tokenised form of bank liabilities given the existing rigorous capital and liquidity frameworks applied to banks. For non-issuance services, DPT Service Providers can offer all types of stablecoins provided that they clearly label the MAS-regulated SCS to distinguish them from the unregulated ones. This will help customers make informed decisions on the risks involved in using unregulated stablecoins.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg: