Singapore warns unregulated stablecoins pose systemic risk as new rules near

The Monetary Authority of Singapore says only fully regulated, reserve-backed stablecoins will qualify as settlement assets as Singapore prepares legislation and expands CBDC trials.

Singapores central bank has signaled an upcoming shakeout of unregulated stablecoins as the country moves to protect the integrity of assets within its financial ecosystem.

In a keynote speech at the Singapore FinTech Festival on Thursday, Monetary Authority of Singapore (MAS) managing director Chia Der Jiun warned that “unregulated stablecoins have a patchy record of keeping their peg.”

“There has been a lot of attention on stablecoins. They are offered as open platforms, able to work across many different applications and use cases,” Chia said. “While agility is a strength, stability needs to be reinforced.”

Chia compared depeggings to the money-market fund runs of 2008, and said that unregulated stablecoins are “not suitable as safe settlement assets for large wholesale transactions.” This signals that Singapore intends to draw a clear distinction between fully regulated tokens and all other stablecoins.

Digital money requires stability

Chia said that the next phase of digital money requires not just speed or programmability but also stability.

While stablecoins are promoted as open, composable platforms that move across applications and borders, he said this needs to be matched with credible backing and redemption rights.

He said that without the foundation, confidence can quickly unravel, especially if weakly regulated issuers trigger broader loss of trust across the sector.

Chia said MAS is preparing legislation for its stablecoin framework finalized earlier this year. On Aug. 15, MAS released a regulatory framework aimed at ensuring stability for single-currency stablecoins.

He said the regime places reserve backing and redemption reliability as the main requirements for eligibility. This signals that only well-capitalized and fully supervised issuers will be recognized as settlement-grade assets.

Chia added that the rules are subject to change as stablecoins become more integrated into the financial sector.

“Over time, if some regulated stablecoins become systemic, regulatory frameworks will need to be strengthened further, cross-border regulatory cooperation enhanced, and access to central bank facilities considered,” Chia said.

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CBDCs and tokenized bank money

In addition to stablecoins, Chia also discussed the central banks vision for other settlement assets, including wholesale central bank digital currency (CBDC) and tokenized bank liabilities.

Chia said that MASs Borderless, Liquid, Open, Online, Multi-currency (BLOOM) initiative is testing how these instruments can operate within a broader tokenized financial system.

“MAS is working with industry partners to explore the use of all three settlement assets,” he said.

He encouraged financial institutions and clearing and settlement networks to conduct trials under the initiative.

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