Singapore regulator responds to Terra collapse; plans to involve public in stablecoin regulations

The Monetary Authority of Singapore (MAS) in response to a parliamentary inquiry, shared insights on how Luna’s collapse affected the economy and laid out plans to engage the public in its stablecoin regulation.

The Minister in charge of MAS Tharman Shanmugaratnam addressing the issues raised stated that the collapse of the Terra ecosystem has reinforced the high risks involved in investing in the cryptocurrency ecosystem.

On the health of the mainstream economy, Shanmugaratnam noted that banks in Singapore had negligible exposures to cryptocurrencies, so the overall impact on the economy is minimal. However, MAS was unable to quantify the number of Singaporeans affected by the crash, due to limited customer data.

The Minister also addressed concerns about the regulation of stablecoins. At the moment, stablecoins are considered Digital Payment Tokens (DPT) alongside cryptocurrencies like Bitcoin under the Payment Services Act. However, regulators are working to treat stablecoins as a single asset class with a focus on regulating the stability of parity and reserve requirements. Shanmugaratnam noted that the MAS was seeking to work with the public to regulate stablecoins.

State of crypto regulation in Singapore

The Singapore Payment Services Act became effective in January 2020 to lay the groundwork for payment systems and payment service providers to operate in the Asian country.

In January 2022, the MAS issued a guide to restrict crypto service providers from advertising or marketing investments in cryptocurrencies. The regulation also saw the closure of crypto ATMs in the country.

In early July, regulators expressed their intentions to set new rules to protect retail investors. The rules, as explained, will impose limits on retail participation and the use of leverage when transacting cryptocurrencies.

Following the collapse of Three Arrows Capital, the MAS on June 30, rebuked the hedge fund for providing false information and exceeding assets below the management threshold.

MAS stick with crypto

Despite the call for more crypto regulations in the region, the MAS remains accommodating to crypto businesses that fall under the Payment Services Act. It is still open to licensing digital asset providers looking to operate in the region. So far, Singapore has granted 14 licenses and approvals in principle to companies such as, Gemini, Coinbase, and Binance.

When asked if Singapore was still pushing your plan to be a cryptocurrency hub, Shanmugaratnam stated:

“From a development perspective, the goal of MAS has been and continues to be to enable the growth of an innovative and responsible digital asset ecosystem.”