S'pore stablecoin rules ahead of global peers, but currency's wide use may take time

Broader adoption would require incentives, says one expert

- Timothy Goh

Singapore's stablecoin regulatory framework is more mature than those of its peers like Hong Kong and the United States, but industry experts said widespread adoption of the digital currency here will take time.

Stablecoins are a type of cryptocurrency whose value is pegged to a currency, commodity, or financial instrument to reduce price volatility. They are commonly used as a more stable medium of exchange, such as for payments and trading, than highly volatile tokens, like Bitcoin.

Popular stablecoins such as the USDT and USDC, and crypto-related stocks like Circle and Coinbase, have traded heavily since the US Senate on June 17 passed a landmark Bill to regulate US dollar-pegged stablecoins.

If signed into law, the new rules will require stablecoins to be backed by liquid assets such as US dollars and short-term Treasury bills and for issuers to disclose their reserves monthly.

Stablecoins have gained some traction in Singapore since August 2023, when the Monetary Authority of Singapore (MAS) set out its requirements for stablecoin issuers following two consultations in 2022.

For example, they are currently being used to maintain reserve assets valued at no less than 100 per cent of the outstanding single-currency stablecoins (SCS) in circulation at all times. The reserves must be held in cash, cash equivalents or in three-month Singapore Government bonds, and denominated in the same currency as the peg.

Issuers must also have a base capital of at least $1 million or 50 per cent of their annual operating expenses, whichever is higher.

They are further required to hold liquid assets worth more than half of annual operating expenses, or enough to support recovery or an orderly wind-down.

Only SCS pegged to the Singapore dollar or one of the 10 most heavily traded and liquid currencies in the world known as the Group of 10 currencies such as the US dollar or Japanese yen can be regulated under the framework.