Singapore opens to stablecoins – once they jump through some hoops
- Reference: 1692162069
- News link: https://www.theregister.co.uk/2023/08/16/singapore_oks_stablecoins/
- Source link:
"When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium of exchange to support innovation, including the 'on-chain' purchase and sale of digital assets," [1]declared MAS, the city-state's reserve bank.
MAS will allow single-currency stablecoins pegged to the Singapore Dollar or other G10 currency, issued in Singapore, with full cash withdrawals available within five days of a customer's request.
[2]
Issuers must have minimum base capital of one million Singapore dollars, or half of their annual operating expenses. They must also keep equivalent capital and liquid assets to avoid insolvency and cope with the aftermath of such events – should the business crater in the manner of Terraform Labs' not-very-stable-after-all [3]TerraUSD instrument.
[4]
[5]
Stablecoin providers that can fulfil all those requirements will receive a "MAS-regulated stablecoins" stamp of approval, which will tell the world their instruments offer a level of safety similar to other financial instruments. Singapore will gain the distinction of being one of the few countries that allows transactions in this form of digital currency.
"Users should make their own informed decisions on the accompanying risks should they choose to deal in stablecoins that are not regulated under MAS's framework," warned the Authority.
[6]
MAS deputy managing director Ms Ho Hern Shin said the framework "aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems."
[7]FTX is back in Japan, where users can withdraw fiat and crypto
[8]Can you raise $100M+ from AI investors with no product? SEC says yes
[9]Singapore's fintech boss says stablecoins might win before CBDCs even get started
[10]Singapore struggles to curb cryptocurrency enthusiasm
In the past, the city-state has used strong language when discussing cryptocurrencies and those who allow them to be traded or used for transactions. MAS chief fintech officer Sopnendu Mohanty [11]vowed last year to be "brutal and unrelentingly hard" on any industry player exhibiting bad behavior. In April 2022, minister of state Alvin Tan [12]warned that "there may be reputational risks to Singapore in respect of DT [decentralized token] service providers created in Singapore but that provide DT services overseas."
The comment pressaged the crashes of Singapore-headquartered companies Terraform Labs, Vauld and Three Arrows Capital.
But in October 2022 MAS commenced a public consultation on stablecoins, and the following month Mohanty [13]expressed some support for the digi-dollars – at least when "well-regulated."
The chief fintech officer said they could "become a disruptive low value transfer cross-border process" and "create a competitive, low value efficient transport system."
[14]
Singapore has also moved to regulate outfits that deal in crypto and other forms of digital payment. From the end of 2023, the tropical nation will [15]require digital payment operators to follow the same sort of regulations and customer protection requirements as traditional financial institutions.
Regulation of a sort familiar to the mainstream financial services industry has shown itself to be an effective protective mechanism for cryptocurrency-related technologies in places like Japan.
Consider the collapse of FTX. The Japanese outpost of the now defunct Sam Bankman-Fried brainchild became the only locale where customers were able to [16]withdraw funds following its collapse.
Japan's law required crypto companies to register with the Financial Services Agency, demonstrate compliance with anti-money-laundering laws, set aside capital reserves, and separate customer and exchange assets.
Singapore's stablecoin plan makes it look like local regulators were taking notes. ®
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[1] https://www.mas.gov.sg/news/media-releases/2023/mas-finalises-stablecoin-regulatory-framework
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZNyeUdjH2hWds0bXTWdRhgAAAZY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://www.theregister.com/2022/05/17/terrausd_luna_crash/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZNyeUdjH2hWds0bXTWdRhgAAAZY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZNyeUdjH2hWds0bXTWdRhgAAAZY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZNyeUdjH2hWds0bXTWdRhgAAAZY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2023/02/21/ftx_japan_users_can_now/
[8] https://www.theregister.com/2023/08/15/can_you_raise_100m_from/
[9] https://www.theregister.com/2022/11/04/mas_stablecoin_cbdc/
[10] https://www.theregister.com/2022/08/30/singapore_struggles_to_taper_cryptocurrency/
[11] https://www.theregister.com/2022/06/27/singapore_cbdc_crypto_policy/
[12] https://www.theregister.com/2022/04/06/singapore_digital_currency_regulation/
[13] https://www.theregister.com/2022/11/04/mas_stablecoin_cbdc/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZNyeUdjH2hWds0bXTWdRhgAAAZY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[15] https://www.theregister.com/2023/07/05/singapore_joins_nations_treating_crypto/
[16] https://www.theregister.com/2023/02/21/ftx_japan_users_can_now/
[17] https://whitepapers.theregister.com/
Re: Worst of both worlds
The one 'end user' benefit of using a cryptocurrency that is highly regulated in this way is that the issuer / broker needs to keep sufficient capital at hand to cover their liabilities (ie the users' deposits). Doesn't seem as safe as a 'real' retail bank where most western countries have government-backed deposit insurance, but certainly safer than a SBF-style wild west where customers deposits are treated as company money. Also, this type of backing only really works for stablecoins with pegged-to-fiat value... if a customer buys $100 worth of crypto that becomes 'worth' $200 a month later and they want to cash out, where is the bank or broker going to get the money from???
"the two advantages of PoW are democratisation...and wallet control"
Wallet control is possible with Proof of Stake, the real advantage of Proof of Work is the impossibility of a central authority to control or issue any currency. As you say, any PoW system where a single entity has control of 51% of the network is worthless.
Re: Worst of both worlds
The one 'end user' benefit of using a cryptocurrency that is highly regulated in this way is that the issuer / broker needs to keep sufficient capital at hand to cover their liabilities (ie the users' deposits). Doesn't seem as safe as a 'real' retail bank where most western countries have government-backed deposit insurance
Your "real" retail banks don't have sufficient capital at hand to cover their liabilities, it's called "fractional reserve banking", and your government deposit insurance schemes are mostly smoke and mirrors designed to try to prevent bank runs from happening in the first place - if a widespread loss of confidence in the banking sector were to occur, you would quickly find that those schemes don't have nearly enough money to handle it. I also recommend looking up the "bail-in" rules that have been put in place in most countries since the last financial crisis, and find out whose money will be used to rescue the banks next time around.
Also, this type of backing only really works for stablecoins with pegged-to-fiat value... if a customer buys $100 worth of crypto that becomes 'worth' $200 a month later and they want to cash out, where is the bank or broker going to get the money from
If the bank is acting as a bank, then you withdraw your funds in the same form you deposited them; if I deposit pounds in my bank, that's what I spend or withdraw, and it would be the same for bitcoin, stablecoins, or other cryptocurrencies. If I deposit one bitcoin, the bank custodies one bitcoin for me, and if I want to withdraw it, the bank gives me back my one bitcoin. What that bitcoin is worth in dollar terms is irrelevant to them.
If, on the other hand, the bank is acting as an exchange, then they are market-making, i.e. matching buyers and sellers. Thus they don't have to " get the money from" anywhere; your $100 worth of crypto is now worth $200 because someone else is willing to pay that for it, and the bank simply takes a fee, or adds a little margin on the bid-ask spread (or both), in facilitation the trade.
Those two functions are distinct and separate, and do indeed require different sets of regulations to protect customers, but in neither case should the bank itself be exposed to price volatility of any crypto on its books.
Re: Worst of both worlds
A 51% attack on the Bitcoin network is no longer financially viable. It is technically possible, but the cost to pull it off would require Elon Musk levels of wealth...and even then, it would bankrupt the backer.
Other networks though BitcoinSV etc...waaaaay cheaper.
Re: Worst of both worlds
All of the governments studying this appear to want a fiat currency, just a digital one. So that's a feature for them, not a bug.
Re: Worst of both worlds
" any cryptocurrency where the user can appeal to a central authority to rectify errors doesn't offer that user total control over their tokens "
I don't see where users had total control over their tokens in the various funny money "exchange" crashes we've seen recently.
But hey, if you want to play with fire, go right ahead. Just don't come crying when you get burned.
Re: Worst of both worlds
I didn't mean to suggest that PoW currencies automatically provided total control to the user, just that it's possible (which it is not for stable coins, nor is it possible to prove mintings are valid). We've also seen poorly implemented wallets result in currency being stolen. To use a gold analogy, what you've described is the same as people who "buy" bullion at exchanges which hold it for them. Unless the key/gold is in your hands, you don't have ownership: this might be further complicated for the former as keys can be duplicated.
The ability to fudge the numbers is precisely why the exchanges threw up incentives to leave crypto in their wallets, rather than transferring it.
Coming up next: Singapore takes decisive steps to regulate the buggy whip, colza oil and linoleum industries.
Crypto is over, folks, It was only ever a scam and now it's a busted scam.
Worst of both worlds
PoW is definitely not without a laundry list of issues but a pegged cryptocurrency with a central issuer is just fiat with extra steps and risks. The only real advantage I can see is a block chain letting others verify account balances but, against that, seeing this value doesn't verify that the underlying fiat actually exists at any given time.
To clarify, the two advantages of PoW are democratisation (a move to conduct a 51% should become aparrent and drop the value, limiting its utility) and wallet control, that is, a user could theoretically encode their private key in something as mundane as stitching in their underwear and later use it to resume use of their tokens while loss of said underwear without backup would theoretically render their wallet unrecoverable. Essentially, any cryptocurrency where the user can appeal to a central authority to rectify errors doesn't offer that user total control over their tokens.