MAS' recent updates to its Payment Services Act ("PS Act") FAQs has shed light on the treatment of stablecoins under the Payment Services Act – in particular that they will generally not be considered as “e-money” for purposes of the PS Act (“E-Money”). In particular, while the value of single currency stablecoins ("SCS") is purportedly fixed with reference to a single currency, the exchange rate of SCS to the currency is not fixed and can vary when traded on exchanges. In addition, holders of a SCS can often use the SCS via third-party service providers (e.g. digital payment token exchanges) or with their own private wallets, without the involvement of the SCS issuer, unlike holders of E-Money who would typically have contractual relationships or accounts with the E-Money issuer and can only use the E-Money through the issuer.
Besides SCS, MAS also clarified that other types of stablecoins (for example, stablecoins whose values reference a basket of multiple currencies or other assets, as well as stablecoins that aim to maintain stable values through algorithms that adjust the supply of the stablecoins in response to changes in the demand) also do not meet the definition of E-Money, as such stablecoins are neither denominated in nor pegged to a single currency by its issuer. MAS therefore expects that in general, stablecoins will not meet the definition of E-Money, but may meet the definition of “digital payment tokens” under the PS Act. Nevertheless, MAS will continue to review industry developments relating to stablecoins and assess its appropriate regulatory treatment accordingly. The updated PS Act FAQs may be accessed here.
Our Financial Services Regulatory Practice advises on a broad range of financial and payments regulatory issues, including the regulatory treatment of various types of digital assets (including stablecoins). Reach out to our Financial Services Regulatory Practice Partners Elaine Chan, Rosabel Ng, Chan Jia Hui, Tian Sion Yoong, or find out more about our practice here.