Singaporean financial watchdog to consult public on stablecoin regulation

The financial regulator admits it’s high time to shift the focus from the KYC/AML issues to more nuanced risks, poised by stablecoins.

The Monetary Authority of Singapore (MAS), a city-state’s principal financial regulator, assesses the merits of a regulatory regime toward stablecoins. Current guidelines focus on know-your-customer and anti-money laundering (KYC/AML) issues and do not reflect the specific risks to which the stablecoins are entitled.

On August 1, the MAS official portal published a written response by the regulator’s head, Tharman Shanmugaratnam, to a question posed by one of Singapore’s members of parliament. The question inquired if there is data on the extent of Singaporeans’ exposure to the recent collapse in the value of the TerraUSD (UST) stablecoin and the Luna token and whether the MAS is actively considering measures to tackle similar crises.

Shanmugaratnam acknowledged that the Terra collapse illustrates the high risks of the crypto investment but insisted that the turmoil hasn’t affected the mainstream financial system and the economy significantly.

In the majority of his answer, the official revealed MAS’ current plans for stablecoins. He claimed that MAS is actively reviewing its approach to the regulation of stablecoins, as the existing framework, in which stablecoins, alongside other cryptocurrencies, are being considered digital payment tokens (DPTs), doesn’t cover the specific risks.

Hence, MAS “is assessing the merits of a regulatory regime” tailored to the specific characteristics of stablecoins. It shall focus on such aspects as regulating the reserve requirements and the stability of the peg. As the response specifies, MAS intends to consult the public on the possible guidelines in the upcoming months.

On July 19, Ravi Menon, the managing director of MAS, publicly disavowed the associations between TerraForm Labs, Three Arrows Capital (a crypto hedge fund ongoing bankruptcy proceedings) and crypto regulation in Singapore. In his speech, Menon also emphasized the necessity to shift the regulatory focus from the KYC/AML toward the more nuanced risks posed by crypto.