Singapore Warns Unregulated Stablecoins Pose Systemic Risk As New...

The Monetary Authority of Singapore says only fully regulated, reserve-backed stablecoins will qualify as settlement assets as Singapore prepares legislation and expands CBDC trials.

Singapore’s central bank has signaled a forthcoming shakeout of unregulated stablecoins as the country moves to protect the integrity of assets within its financial ecosystem.

In a keynote speech at the Singapore FinTech Festival on Thursday, Monetary Authority of Singapore (MAS) Managing Director Chia Der Jiun warned that “unregulated stablecoins have a patchy record of keeping their peg.”

“There has been a lot of attention on stablecoins. They are offered as open platforms, able to work across many different applications and use cases,” Chia said. “While agility is a strength, stability needs to be reinforced.”

Chia compared depeggings to the money-market fund runs of 2008, and said that unregulated stablecoins are “not suitable as safe settlement assets for large wholesale transactions.” This signals that Singapore intends to draw a clear distinction between fully regulated tokens and all other stablecoins.

Chia said that the next phase of digital money requires not just speed and programmability but also stability.

While stablecoins are promoted as open, composable platforms that move across applications and borders, he said this needs to be matched with credible backing and redemption rights.

He said that without the foundation, confidence can quickly unravel, especially if weakly regulated issuers trigger broader loss of trust across the sector.

Chia said MAS is preparing legislation for its stablecoin framework, finalized earlier this year. On Aug. 15, MAS released a regulatory framework aimed at ensuring stability for single-currency stablecoins.

He said the regime considers reserve backing and redemption reliability as the main requirements for eligibility. This signals that only well-capitalized and fully supervised issuers will be recognized as settlement-grade assets.

Source: CoinTelegraph