The Monetary Authority of Singapore (MAS) Approves Stablecoin Issuers
The Monetary Authority of Singapore (MAS) has granted in-principle licenses to issuers of stablecoins backed by the Singapore dollar (SGD) or any other currency from the Group of Ten (G10) economies. These approvals may soon allow crypto traders and investors to earn passive income from stablecoin holdings.
The Singapore central bank has approved stablecoin issuers, including Paxos Digital Singapore (Paxos) and StraitsX, to offer stablecoins backed by the city-state’s local currency, the US dollar, or any of the other G10 currencies. These successful applicants had to meet reserve asset, redemption, and disclosure requirements.
Singapore Beats Asian Rivals
According to Ravi Menon, the head of the MAS, Paxos and StraitsX satisfied the central bank’s requirements “substantively.” It issued guidance for non-government-backed stablecoins in August.
Both Paxos Digital and StraitsX will issue US dollar-based stablecoins. StraitsX already has an SGD-backed coin.
Issuers Face Risk to Pay Passive Crypto Income
Stablecoins form a bridge between the crypto and traditional finance worlds. Many traders buy stablecoins with fiat currency and use them to purchase other crypto assets or invest them to earn passive income.
Stablecoin issuers keep reserve assets that they can easily liquidate when a customer wants to redeem a stablecoin for fiat money. Without considering so-called algorithmic stablecoins, these reserve assets can be cash, cash equivalents, or short-term Treasuries that earn interest.
But Treasuries make stablecoin businesses prone to the movements of bond markets. Recently, yields soared after a major selloff following the Israel-Hamas war.
Hot Take: The Future of Stablecoins in Asia
Stablecoins are gaining traction in Asia as more countries seek to enter this burgeoning market. With Japan and Hong Kong also vying for a piece of the pie alongside Singapore, it is clear that this sector is poised for significant growth in the region.
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