Singapore Proposes 100% Reserves for Stablecoins

Singapore's financial regulator, the Monetary Authority of Singapore, has proposed regulatory changes that will significantly impact the stablecoin industry. The proposed rules will ban stablecoin issuers from paying any yield to investors and require them to maintain assets equal to at least 100% of all tokens in circulation at all times.

The proposed rules will also require stablecoin issuers to hold these assets in accounts separate from their own funds. This means that stablecoin issuers will not be able to use their own funds to cover any shortfall in their reserves. The regulator has stated that stablecoins should be used for payments, not as investment products or to generate yield similar to interest earned on a bank savings account.

The consultation period for the proposed rules is set to close on October 16. The proposed rules align with regulations in other jurisdictions, such as the U.S. GENIUS Act and the European Union's Markets in Crypto-Assets (MiCA) regulation, which also ban stablecoins from paying interest or yield to investors.

Banks such as JPMorgan Chase have lobbied against allowing stablecoins to provide yield, arguing that it will compete with and hurt their retail banking businesses. The world's two main stablecoins, Tether's USDT and Circle Internet Group's USDC, will be affected by the proposed rules.

## Why it matters The proposed rules are significant because they will impact the way stablecoins are used and regulated in Singapore. Stablecoins are cryptocurrencies whose value is pegged to an underlying asset, typically the U.S. dollar. They are widely used for payments and as a store of value. The proposed rules will likely have a significant impact on the stablecoin industry, as they will limit the ability of stablecoin issuers to offer yield to investors.

The decline of Circle Internet Group's stock price, which has fallen 25% over the last 12 months to trade at $90.06 U.S. per share, may be related to the proposed rules. The company's USDC stablecoin is one of the two main stablecoins in the world, and the proposed rules will likely affect its business model.

## What happens next The consultation period for the proposed rules is set to close on October 16. After that, the regulator will review the feedback and decide on the implementation of the proposed rules. No implementation date has been set, but the proposed rules are likely to have a significant impact on the stablecoin industry in Singapore and beyond.