Singapore’s central bank has proposed a slew of new regulatory measures to reign in the local crypto industry, starting with some strict standards for stablecoin issuers, in a bid to reduce the risk of consumer harm from the volatility of the industry.

The measures published in two consultation papers include setting capital and reserve requirements for issuers of stablecoins, which are cryptocurrencies that maintain their value against fiat currencies or assets like gold. The measures also seek not to allow businesses to lend out cryptocurrencies owned by retail customers and to ensure customer assets are separated from their own assets.

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The rules also proposed banning issuers from engaging in other activities that introduce additional risks like lending or staking that allows users to lock their crypto and earn interest.

The proposal marks a major shift in Singapore’s stance on crypto. The crypto winter is particularly an issue for Singapore regulators, as many collapsed multi-billion dollar crypto enterprises like stablecoin issuer Terraform Labs and crypto hedge fund Three Arrows Capital have ties to the country.

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The Monetary Authority of Singapore (MAS) had since promised to tighten regulations for the sector. The MAS has said it discourages the public from speculative trading in cryptocurrencies. The regulator has already introduced restrictions on the advertising of cryptocurrency services in public places.

In two documents, which are open to public consultation, the new stablecoin rules are accompanied by intentions to limit certain retail investors from accessing crypto markets.

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“MAS is concerned that retail customers may not have the financial wherewithal to withstand large losses that are likely to ensue from speculative trading of markets that they do not fully understand,” a consultation paper on proposed regulatory measures for digital payment token services said.

MAS also said, “Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them.” The proposed measures should help to reduce risks, it added.

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In addition to addressing money laundering, terrorism financing, technology, and cyber risks, the regulator said it wanted to ensure regulated stablecoins had a high degree of value stability.

Stablecoins that are pegged to a single currency (SCS) where the value in circulation is more than 5 million Singapore dollars ($3.53 million), issuers must hold reserve assets in cash, cash equivalents, or short-term sovereign debt securities at least equivalent to 100% of the par value of the outstanding SCS in circulation. The assets should be denominated in the same currency as the pegged currency. All SCS issues in Singapore can be pegged only to the Singapore dollar or any Group of 10 (G10) currency, the MAS said.

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According to the statement, banks in Singapore will be allowed to issue SCS and no additional reserve backing and prudential requirements will apply.

While it is unclear when the proposed measures might be implemented, the public has been invited to provide feedback by December 21, 2022.