- Singapore has granted in-principle license approvals to stablecoin issuers Paxos Digital Singapore and StraitsX.
- The approvals coincide with the Singapore Fintech Festival.
- MAS Managing Director Ravi Menon highlights the potential of stablecoins as “digital money” if properly regulated.
Singapore has awarded in-principle license approvals to stablecoin issuers Paxos Digital Singapore and StraitsX, intensifying the competition among Asian financial centers to capture a share of the $127 billion global stablecoin market.
The move coincided with the Singapore Fintech Festival, where MAS Managing Director Ravi Menon described stablecoins as potentially playing “a useful role as digital money” if properly regulated.
According to Menon, Paxos and StraitsX “substantively comply” with MAS’s upcoming stablecoin framework. The forthcoming regulations will apply to stablecoins pegged to the Singapore dollar or any G10 currency, covering areas like reserve assets, redemption rights, and disclosure standards.
Both Paxos and StraitsX plan to issue stablecoins pegged to the US dollar after receiving MAS approval. StraitsX also intends to bring its existing Singapore dollar stablecoin under the new regulatory framework.
Stablecoin maintains pegs to fiat currencies, usually 1:1, by backing tokens with reserves such as cash and bonds.
The stablecoin market has been dominated by Tether, which has $87.4 billion in circulation. USD Coin, issued by Circle, is the second largest at $24 billion. Although the stablecoin market cap declined after last year’s crypto crash, profitability has increased due to higher yields on reserve assets.
Tether has grown its market share from 48% at the beginning of 2023 to 69% currently, according to DefiLlama data. The collapse of algorithmic stablecoin TerraUSD further motivated regulators to address the risks posed by stablecoins to financial stability.
Alongside Singapore, Japan and Hong Kong are also positioning themselves as Asian hubs for regulated stablecoin services. Japan’s stablecoin law took effect earlier, and banking giant Mitsubishi UFJ Financial Group is reportedly in talks regarding stablecoin issuance.
Hong Kong plans to roll out stablecoin regulations by 2023-2024 as part of wider efforts to rebuild its status as a leading digital asset hub.
Despite growing stablecoin activity in Asia, US regulators have taken an increasingly strict approach after last year’s crypto market turmoil. Recently, the SEC issued a subpoena to PayPal regarding its dollar-backed stablecoin product.
The New York Department of Financial Services earlier directed Paxos to cease issuing Binance-branded stablecoin BUSD. Such actions have prompted stablecoin companies like Paxos to look abroad.
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