Singapore Regulatory Authority Engages Ripple and Circle for Stablecoin Guidance

The Monetary Authority of Singapore (MAS) has taken a significant step toward regulating stablecoins by releasing a consultation paper seeking industry feedback on its proposed approach to overseeing these digital assets within the city-state.

In response to the consultation, major cryptocurrency firms Circle and Ripple provided their perspectives on a number of crucial topics relating to stablecoin regulation, including regulatory scope, stablecoin issuance, reserve assets, redemption rules, and systemic risk management.

Ripple’s Perspective

Ripple endorsed the MAS’s decision to regulate “single currency pegged stablecoins” (SCS) created in Singapore as the primary area of attention. However, Ripple has issued a warning that SCS coming from locations other than Singapore may eventually grow to be systemically important. Ripple advised that MAS create policies that can manage risks while still supporting innovation in order to allay this worry.

Regarding regulations governing the issuance of stablecoins, Ripple supported MAS’s suggestion to add a new regulated activity called “Stablecoin Issuance Service” to the Payment Services Act. This action would make it possible to supervise stablecoin issuance in a more organized manner.

Circle’s Take

The business that created the USDC stablecoin, Circle, agreed that it is fair to concentrate on SCS that originated in Singapore while highlighting the fact that its own USDC is closely tied to cash reserves and is already governed in the United States. However, Circle issued a warning against restricting the usage of significant offshore SCS in Singapore as it considers that such limitations may make it more difficult for Singaporeans to utilize the advantages and liquidity that these stablecoins provide.

Both Ripple and Circle highlighted concerns about the need that all reserves be stored in Singapore, particularly for SCS that is tied to a foreign currency. While Circle emphasized that its USDC reserves are split across several countries to comply with varied regulatory requirements, Ripple advocated worldwide regulatory collaboration to create uniform global standards.

Both companies backed MAS’s proposal for a five-business-day redemption restriction, but they demanded additional clarification on the definitions and transmission standards for intermediaries. To guarantee complete due diligence, Ripple suggested a tiered structure of requirements for issuers and service providers.

Prudential Safeguards and Systemic Risks

The addition of capital buffers and activity caps for stablecoin operators was supported by both Ripple and Circle, but they did ask for some leeway in the event of legally separate affiliates. Circle stressed the necessity of more stringent regulations for bank-issued “tokenized deposits” as opposed to fully-reserved “tokenized cash.”

Both businesses endorsed MAS’s readiness to modify legislation as required, noting the possibility for global SCS to expand to a size where they present systemic issues in Singapore. Circle, on the other hand, advised against unduly rigid regulations that may reduce the usefulness of offshore SCS, while Ripple urged for the adoption of explicit criteria for classifying arrangements as “systemic.”

Industry pioneers like Circle and Ripple have important advice that will help Singapore develop a strong regulatory framework for stablecoins and determine how these digital assets will be used in the future.